European labour costs surge

Due to the current fears about inflation across the continent, wage growth in Europe accelerated more than forecast. Due to the higher cost of living, workers have actively sought an increase in their pay packets as indicated by the picketing by Shell’s subcontractors delivering to its forecourts.

Across the euro zone, labour costs have increased by 3.3 percent even though analysts had predicted only a 2.9 percent gain by March.

Latvia posted the biggest first-quarter gain in labour costs, with an increase of 33.3 percent whilst Labour costs in Poland increased by 13.9 percent in the first three months of this year, compared to 11.2 percent between October and December 2007.

The above forecast is a sign that labour cost growth may actually be faster than the rate of inflation, which is feeding through the economy and in a negative downward spiral in turn fuelling inflationary pressures.

This has added weight to the argument that the European Central Bank (ECB) should raise interest rates from 4 percent.

Following this the ECB President, Jean-Claude Trichet, said that rate increase may be needed in July in order to steady prices and help to aid what is a slowing economy across all 15 countries.

After the report the euro rose 0.1 percent against the dollar although the currency weakened again but still the euro traded at $1.5327 yesterday morning.

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