Labor costs in CEE grew faster in Q1

In the first quarter of 2025 the hourly labor costs rose by 3.4% y/y in the euro area and by 4.1% y/y in the EU. In the euro area the hourly labor costs growth dynamics have been decelerating for couple of quarters. Comparison to the ECB wage tracker (the headline values that show negotiated wage growth that includes collectively agreed one-off payments, such as those related to inflation compensation, bonuses or back-dated pay, which are smoothed over 12 months) suggest that the wage growth should be further easing in the upcoming quarters. On the other hand, in the region, hourly labor costs ticked up in the first quarter of 2025. On average they grew 11.3% y/y up from 10.5% y/y in the last quarter of 2024. Such development is driven by increase of hourly labor costs in Czechia, Slovenia, Romania and Serbia in 1Q25. In general, the highest increases in hourly wage costs for the whole economy across EU were recorded in Romania (+16.1%), Croatia (+13.5%) and Slovenia (+11.9%). In Croatia, however, the downward trend continues as the growth of labor costs has been continuously decelerating from its peak at 17.6% y/y in 2Q24. Apart from Romania, Croatia and Slovenia, also Poland and Serbia experience growth of labor costs in double-digits.