Wage inflation on the rise

Yesterday the Labour Cost Index (LCI) figures for Q3 were released. The private-sector Labour Cost Index rose 0.6% and this was “significantly” faster than the 0.4% advance expected by the market. The annual change for all sectors is 1.6%. Although the economy is not racing ahead the RBNZ will be concerned with regard to the inflation side of things. This underscores sentiment that the economy will likely generate higher inflation, with even modest growth likely to encounter a relative lack of supply. This with future inflationary expectations will put further pressure on the OCR – expect a rise early 2011.

Leave a Reply

Your email address will not be published. Required fields are marked *