Economic news

German wage catch-up continues even as economy shrinks, Bundesbank says

2024.10.24 06:30

FRANKFURT (Reuters) – German wages are continuing to grow briskly despite a shrinking economy as workers regain more of the purchasing power they lost to high inflation, the country’s central bank said on Thursday.

Collective wage agreements in Europe’s largest economy were up 6.2% year on year between January and August, according to the Bundesbank. It pencilled in wage growth of 4% for the last quarter of next year based on already signed agreements.

© Reuters. FILE PHOTO: Dark clouds hang over the financial district in Frankfurt, Germany, February 18, 2021.  REUTERS/Kai Pfaffenbach/File Photo

“These findings do not fundamentally call into question the expected disinflation process in Germany,” the Bundesbank said in its monthly report. “However, in addition to productivity developments and companies’ profit margins, the labour market situation is of great importance for the speed and extent of disinflation.”

The German central bank added that gross domestic product likely shrank again in the third quarter of this year but the country should avoid “a significant, broad-based and prolonged decline in economic output”.



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