What is the real inflation rate in the euro zone?

There is a huge gap in the euro zone between inflation measured by total consumer prices (2.6% year-on-year in May 2024) and inflation measured by unit labour cost growth ( more than 5% year-on-year in the first quarter of 2024). What accounts for this gap? A fall in import prices; A fall in corporate profit margins. The level of inflation at which euro-zone inflation will stabilise depends on the relative strength of: The effect of headline inflation on unit labour cost growth , an effect that results from indexing wages to prices (if headline inflation is low, wages will slow down); The effect of unit labour costs on headline inflation (as companies are unable to withstand a continuous fall in profit margins); The effect of the rise in the growth rate of import prices. In the past, when unit labour cost growth outpaced inflation, it was later seen that inflation outpaced unit labour cost growth .