Euro zone inflation confirmed at ECB target, Q3 wages slow

Published 12/16/2010, 05:33 AM
Updated 12/16/2010, 05:36 AM

* November euro zone inflation at 0.1 pct

* Year-on-year inflation 1.9 percent

* Hourly wage costs rose by 0.8 percent

BRUSSELS, Dec 16 (Reuters) - More expensive energy was the main driver of euro zone inflation in November, but the pace of price growth remained at the European Central Bank's target as wage growth slowed sharply in the third quarter, data showed.

The European Union's statistics office Eurostat said consumer prices in the 16 countries using the euro rose 0.1 percent month-on-month for a 1.9 percent year-on-year increase, as expected by economist polled by Reuters.

Eurostat said higher prices of fuels for transport, heating oil and gas added almost 0.51 percentage points to the year-on-year figure. Petrol and more expensive clothing and vegetables were also key drivers for the monthly increase.

Without the volatile energy and unprocessed food costs, or what the ECB calls core inflation, prices were flat month-on-month and grew 1.1 percent year-on-year, the same as in October.

The ECB wants to keep headline inflation below, but close to 2 percent over the medium term.

An even broader measure of core inflation, which excludes alcohol and tobacco prices, showed prices fell 0.1 percent month-on-month in November for a 1.1 percent annual rise.

In the euro zone, prices fell month-on-month in Ireland, Cyprus, Malta and the Netherlands.

Separately, Eurostat said wage growth in the third quarter slowed sharply year-on-year to 0.7 percent from 1.5 percent in the second quarter and 1.9 percent in the first.

Total hourly labour costs, which apart from wages include employers' social contributions and employment taxes less subsidies, grew 0.8 percent in annual terms in the third quarter, slowing from 1.6 percent in the second quarter.

Wages fell in euro zone periphery countries most exposed to market concerns over sovereign debt -- Greece, Spain, Portugal, as well as in Estonia, Latvia and Lithuania and the Netherlands.

Data for Ireland, which has secured an EU/IMF financial aid package to fend off upward market pressure on its yields, was not available.

Total labour costs also fell in Finland, even though wages there grew, thanks to a sharp fall in employers' social contributions and employment taxes less subsidies.

(Reporting by Jan Strupczewski, editing by Luke Baker)

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