Germans are suffering large cuts in real pay - Bundesbank report

FRANKFURT, May 23 (Reuters) - Workers in Germany are experiencing large cuts in their purchasing power as modest pay rises fail to keep up with record-high inflation, the country's central bank said in a report on Monday.

In its monthly report, the Bundesbank also said upcoming wage negotiations will need to balance an uncertain economic outlook and concerns about job losses with persistently high inflation and labour shortages.

It said the economy should still be growing slightly this quarter, but it warned of headwinds from the rising cost of living and the fallout of Russia's invasion of Ukraine.

Basic pay rose by just 1.6% in the first quarter of the year once pandemic-related bonuses are stripped out, and even new contracts only showed moderate increases. Inflation was 7.4% in April, and the Bundesbank sees it at roughly 7% for the year.

"Currently, the increase in collective wages is still influenced by old agreements, which were struck in an environment of lower inflation rates and pandemic-related damage," the Bundesbank said.

"It should be noted that the increased price of largely imported fossil fuels reduce the scope for domestic redistribution," the Bundesbank added.

The central bank added that German economic output should still increase slightly in the second quarter of the year thanks to a relaxation of pandemic-related restrictions, which should boost consumption.
Reporting By Francesco Canepa; Editing by Hugh Lawson

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.