Eurozone Inflation Softens While Wages Soar in Q4
It is a relatively quiet day on the European economic calendar. Finalized Eurozone inflation numbers and wage growth figures drew interest early in the European session.
In February, the Eurozone annual inflation rate softened from 8.6% to 8.5%, unchanged from prelim figures. The annual core inflation rate accelerated from 5.3% to 5.6% in February.
According to Eurostat,
- Luxembourg (4.8%), Belgium (5.4%), and Spain (6.0%) recorded the lowest annual rates, while Latvia (20.1%) reported the highest.
- The most significant contributions came from food, alcohol, & tobacco (+3.10 percentage points, pp), services (+2.02 pp), and non-energy industrial goods (+1.74 pp).
- Energy contributed just 1.64 percentage points.
- Month-on-month, consumer prices increased by 0.8%, reversing a 0.2% decline from January.
While the inflation figures were unchanged from prelim figures, wages surged in Q4. Labor costs increased by 5.7% annually in Q4.
According to Eurostat,
- Wages & salaries per hour worked rose by 5.1% in Q4 compared with Q4 2021, while the non-wage component jumped by 7.7%.
- Wages & salaries per hour worked increased by 3.0% in Q3.
Following the ECB monetary policy decision and the shift to a data-dependent policy view, the wage growth figures could leave the hawks with the upper hand. A sharp increase in salaries would support consumption but could also push consumer prices higher.
With inflation and wage growth in focus, investors should also monitor ECB member speeches. However, with no ECB Executive Board members on the docket, commentary with the media will influence.
EUR/USD Reaction to Eurozone Inflation and Wages
Ahead of today’s numbers, the EUR/USD fell to an early low of $1.06081 before rising to a high of $1.06700.
However, the EUR/USD fell to a post-stat low of $1.06314 in response to the stats.
This morning, the EUR/USD was up 0.23% to $1.06365.
Looking ahead to the US session, it is a quiet day on the US economic calendar. Prelim Michigan Consumer Sentiment figures for March and industrial production numbers for February will draw interest.
Barring an unexpected fall in industrial production, the Michigan Consumer Survey should have more influence. Beyond the headline number, investors need to consider sub-components, including inflation expectations. In February, year-ahead inflation expectations rose from 3.9% to 4.1%.
However, there are also no FOMC member speeches to consider. The Fed entered the blackout period on Saturday, leaving investors to consider how the Fed would respond to the numbers.