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Economy in Brief

German Real Wages Slide Lower Y/Y and Plunge in Current Quarter 
by Robert Brusca October 22, 2007

The threat to growth in Europe has been named in the past weekend’s G-7 meeting as primarily due to the strong Euro. The Euro remains a threat to growth though Germany’s finance minister was quite blasé about it in comparison to Trichet (of France and the ECB) and LaGarde (FinMin of France). Still one important factor remains, the consumer, and there the rise in energy prices remains a problem as headline inflation is eroding real wages. Real wages may not be deemed ‘growth threat number one’, but just because your picture is not framed at the top of the most-wanted list at the post office is no reason to count the risk as benign. Real wages are dropping on the sequential growth rates at an increasingly rapid pace. In the third quarter they are falling at a pace of nearly 5% annualized.

German Wages and Estimated Real Wages
  Month-to-Month At Saar Saar
  Aug-07 Jul-07 Jun-07 3-Mo 6-Mo 12-Mo Qtr-2-Date
Wages -2.5% 1.1% -0.5% -7.4% 0.5% 1.0% -2.8%
Inflation (CPI) 0.1% 0.3% 0.1% 1.8% 2.7% 2.0% 2.2%
Real Wages -2.6% 0.9% -0.6% -9.0% -2.1% -1.0% -4.9%
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