Real wage growth faces a setback
Dr. Dominik Groll, labor market expert at the Kiel Institute, comments on the latest figures released by the Federal Statistical Office on wage developments in the second quarter of 2026, according to which real wages increased by 1.5 percent year-over-year:
“Gross monthly earnings per employee rose by a nominal 4.1 percent in the second quarter, matching the robust pace recorded in the two preceding quarters. As consumer price inflation picked up from 2.2 percent in the first quarter to 2.5 percent in the second, real wage growth decelerated to 1.5 percent. The higher inflation rate reflected the sharp increase in energy prices in the wake of the Iran conflict; the temporary fuel tax reduction was able to offset only part of the rise in diesel and gasoline prices.
In the current third quarter, the inflation rate is likely to edge up once again, which is supported by the July reading of 2.8 percent already on hand. Moreover, nominal wage growth is expected to lose some momentum. Against this backdrop, real wage growth is set to slow further.
Overall, the rise in energy prices associated with the Iran conflict remains far less severe than the surge observed during the Ukraine war in 2022. While price increases for gasoline, diesel, and heating oil are comparable in magnitude, natural gas prices and electricity prices have thus far been much less affected. Consequently, employees’ purchasing power is unlikely to decline outright—as it did at that time—but rather to grow at a more moderate pace.”
