Report
A "second-round effect" of the rise in the oil price on wages is appearing in the euro zone, and this may be worrying
The fall in the unemployment rate has not had any noticeable effect on wage growth in the euro zone; but the rise in inflation caused by the rise in energy prices seems to have had a (slightly) positive effect on nominal wage growth in the recent period, and, as a result of the cyclical slowdown in productivity ( as the slowdown in growth is also linked to the rise in the oil price), even more on unit labour costs. We believe this "second-round effect" (effect on inflation through wages) of rises in the oil price is bad news: It could actually prompt the ECB to raise its interest rates from the third quarter of 2019, even if it is not due to a fall in unemployment; The rise in unit labour costs may reduce corporate margins without creating an improvement in employees’ situation, as their real wages are suffer ing from the rise in energy prices.
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Natixis
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Patrick Artus
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