ECB Tracker Points to 2.6% Wage Growth in 2027
Key Facts
The European Central Bank’s forward-looking wage tracker indicated that negotiated wage growth in the euro area will average 2.6% over the first three quarters of 2027, after fluctuating between 2.5% and 2.8% in the remaining months of 2026. At its press conference on October 29, the ECB said the reading puts wage pressures on a path close to this year’s levels, with a slight increase in the average during the early months of next year. This comes as policymakers monitor price pressures and labor costs. The Governing Council left all three key interest rates unchanged at the same meeting. It reaffirmed its commitment to returning inflation to its 2% medium-term target, with decisions based on the data and made meeting by meeting.
The figures point to a less pronounced path than a sustained jump in wage growth: the tracker put the range at 2.5% to 2.8% for the remaining months of 2026, followed by an average of 2.6% over the first three quarters of 2027. The indicator differs from employee compensation data, which measure what workers actually receive; compensation growth slowed to 3.3% in the second quarter of 2026, from 3.6% in the first quarter. The ECB said rising productivity helped contain unit labor cost growth. This gives policymakers an indicator of negotiated wage pressures alongside broader labor cost measures. But the tracker remains conditional on the agreements available and does not represent an independent forecast of the wage path.
The wage path comes amid a rise in inflation in September, with the euro area’s annual rate climbing to 3.8% from 3.2% in August. Inflation excluding energy also rose to 2.3% from 2.1%, according to the ECB. At its press conference, the ECB said energy prices had increased above the path embedded in its staff projections in September. It added that this “is likely to push inflation higher in the near term and keep headline inflation well above target over the coming quarters.” The warning puts wage developments in a broader picture that includes energy and underlying price pressures, as the ECB targets inflation stability at 2% over the medium term.
The September release of the wage tracker had shown projected negotiated wage growth of 2.7% in the first quarter of 2027 and 2.8% in the second quarter, based on coverage of 32.5% and 25.1%, respectively. This is an earlier reading that differs from the average for the first three quarters presented by the ECB at its October press conference. The ECB had explained that the forward-looking component is based on active collective agreements and available data, and may therefore change as new agreements arrive or data are revised. In its earlier clarification, it stressed that this component “should not be interpreted as a forecast.” The figures therefore provide an observational signal of the path of covered agreements, while their scope remains tied to coverage and updates.
In activity data, the euro area economy grew 1.3% year over year in the third quarter of 2026, exceeding the 1.1% forecast in a Reuters poll. Quarterly growth also exceeded analysts’ 0.2% forecast, according to the Associated Press. These figures provide context for the discussion of how wages and productivity may interact with economic activity, but they are not part of the wage tracker reading. The ECB is scheduled to publish the wage tracker release on November 4 at 10:00, followed by the euro area’s flash inflation estimate at 15:00. The following day, the ECB’s schedule lists Christine Lagarde as taking part by recorded video message in an event marking the 20th anniversary of Slovenia’s accession to the euro, rather than giving a speech.
The tracker’s forward-looking horizon in the November release extends to the third quarter of 2027, according to the schedule announced by the ECB, and then covers all of 2027 in the December release. In its 2026 economic bulletin, the ECB had projected negotiated wage pressures to hold steady at 2.6% during 2026 before edging up to 2.7% in the first half of 2027. In the Survey of Professional Forecasters, projections for nominal wage growth in 2026 and 2027 were revised up slightly, with growth expected to ease to 2.8% in 2028 and 2.7% over the longer term. Participants estimated employee compensation growth at an average of 3.3% in 2026, 3.1% in 2027 and 2.8% in 2028, with an upward revision of 0.1 percentage point for 2026 and 2027. These estimates provide broader paths for wages and compensation alongside the ECB tracker’s successive updates.