POLITICS & INSTITUTIONS - ECONOMY

Inflation in Luxembourg

A wage indexation for Christmas?



While Statec expects the wage indexation to be triggered at the end of 2021, it also expects the price of services to rise as a result of indexation. Photo: Mauro Bottaro / EU

While Statec expects the wage indexation to be triggered at the end of 2021, it also expects the price of services to rise as a result of indexation. Photo: Mauro Bottaro / EU

According to Statec, rising consumer prices could lead to the triggering of wage indexation by the end of the year, thus confirming a forecast made last May.

In July, the annual inflation rate was 2.3%, compared to 2.2% a month earlier, Statec calculated on Wednesday. The statistics institute revised its inflation forecast for the current year to 2.2% (from 2.0% previously), under pressure from a slightly more buoyant underlying inflation of 1.4%.

The next index wage boost is therefore likely to be triggered in the last quarter of this year, according to the three Statec scenarios. In May, two of the three scenarios predicted that wages would rise at the end of this year.

A sales effect

The consumer price index fell by 0.4% in July due to the summer sales. The biggest contributors to the fall clearly reflect the trend, with an 11.8% drop in the price of clothing and a 1.4% fall in the price of furnishings, for example.

Conversely, transport prices rose by 0.9% in one month, influenced by travel (+7.9%) and especially airline tickets (+21.3%). But the summer holidays don’t explain everything: the price of petroleum products continued a growth trajectory that began three months earlier. And, in one year, the price of black gold and its derivatives have risen by 28.5%, according to the Statec.

But regardless of whether the price of a barrel of crude oil will rise moderately or sharply in the coming months, Statec comes to the same conclusion: wage indexation is on the horizon for the last quarter of this year. While this news should put a smile on the face of employees, it will not be without consequences for the economy. In this respect, Statec anticipates an impact on the price of certain services, which should contribute to the rise in core inflation, expected to reach 1.7% next year after this year’s 1.4%.

This article was originally published on Paperjam. It has been translated and edited for Delano.