German wages 'not to blame for inflation last year'
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A leading German economics institute has said there was little evidence that inflation last year in Europe's largest economy was being driven by wage increases, a finding that may help the European Central Bank (ECB) to halt hiking official interest rates when it next meets in September.
The Ifo institute said that inflation in Germany last year was mostly driven by higher input costs, including intermediate manufactured products, the prices for energy, and by the prices of raw materials.
Those costs combined accounted for 5.7 percentage points of the 8.3% rise in the price of consumer goods in Germany, with increased profits, the second most important price driver, contributing 1.4 percentage points, Ifo said.
“Some companies were able to expand their profit margins last year due to strong demand in many consumer-driven sectors,” said Timo Wollmershäuser, head of forecasts at ifo.
Ifo estimated that wages accounted for 0.6 percentage point to inflation, meaning "a wage-price spiral has so far failed to materialise”, Mr Wollmershäuser said in a commentary.
The ECB last week completed a year of increasing rates to counter inflation but there are some slender hopes the central bank will call a halt in September. It has, however, drawn attention to services inflation in the eurozone.