German negotiated wages rise more strongly in first quarter

Women sort freshly harvested and washed asparagus at the farm of Peter Lipp, one of Germany's biggest asparagus farmers, near Weiterstadt

BERLIN (Reuters) – Negotiated wages in Germany rose by 2.8 percent on average in the first quarter compared with the same period last year, data showed on Tuesday, boosting expectations that household spending will remain a key driver of growth in Europe’s largest economy.

Negotiated wages, as reported by the Statistics Office, include collectively agreed basic pay as well as one-off payments, annual bonuses and back payments from wage deals.

The 2.8 percent rise in the first quarter was above the long-term average of 2.5 percent in the past 20 quarters and it marked an acceleration in wage growth from a 2.2 percent increase in the final quarter of 2016, the office said.

Negotiated wages also rose more sharply than consumer prices which increased by 1.9 percent during the same period, the data showed, suggesting consumers have more money in their pockets to spend despite rising inflation.

In 2016 as a whole, negotiated wages rose 2.0 percent after an increase of 2.1 percent in 2015.

Roughly 17 million workers in Germany are represented by unions who negotiate pay agreements every one or two years.

Household and state spending were the main growth drivers in German last year when the economy expanded by 1.9 percent, the strongest rate in five years. In the first quarter of 2017, growth picked up further with the quarterly rate rising to 0.6 percent on the quarter.

(Reporting by Michael Nienaber)