Workers in Germany are experiencing sharp reductions in their purchasing power, as modest wage increases can not keep pace with record inflation, the central bank said in a report.
In its monthly report, the Bundesbank also said that the forthcoming wage negotiations should balance a precarious economic outlook and worries about job losses with persistently high inflation and labor shortages.
He also said the economy should continue to grow slightly this quarter, but warned of problems with rising cost of living and the effects of the Russian invasion of Ukraine.
The basic salary increased by only 1.6% in the first quarter of the year when the pandemic-related benefits were deducted, while even the new contracts came with small single increases.
“Currently, the increase in collective wages is still influenced by old agreements, which were concluded in an environment of lower inflation and pandemic-related losses,” the Bundesbank said.
He notes that the increased price of largely imported fossil fuels reduces the margin for domestic redistribution.
The central bank added that German economic output should increase slightly in the second quarter of the year, thanks to the easing of restrictions on the pandemic, which will boost consumption.
Source: Capital
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