4 ] the ecb wage tracker – an important tool used to assess wage developments across the euro area – is signalling that overall wage pressures have moderated since 2023. [ 5 ] furthermore, the indeed wage tracker – which reflects the wages offered in job postings and thereby should be a leading indicator for overall wage dynamics – has materially decelerated in recent months. at the same time, wage growth is expected to remain elevated in 2024, and to show a bumpy profile. these developments reflect the staggered nature of the wage adjustment process as workers continue to recoup real wage losses from past price shocks, as well as the important role of one - off payments in this process. such one - off payments are also behind the increase in euro area negotiated wage growth in the first quarter. similarly, one - off payments likely played a significant role in the increase in the growth rate of the “ wages and salaries ” component in the experimental flash release for eurostat ’ s labour cost index ( lci ) for q1 2024, which jumped to 5. 0 per cent from 3. 2 per cent in q4 2023. the impact of higher wages on price pressures depends on the rate of labour productivity growth. in 2023, labour productivity fell, such that unit labour costs grew more quickly than wages. preliminary data for the first quarter of 2024 suggest that aggregate labour productivity was constant ; given the strongly procyclical behaviour of labour productivity, the march staff projections foresee labour productivity growing at 0. 1 per cent in 2024, 1. 2 per cent in 2025 and 1. 2 per cent in 2026 due to the output recovery outpacing employment growth. [ 7 ] under this baseline, unit labour costs will grow more slowly than nominal wages. in addition to a slower rate of growth of labour costs, deceleration in domestic inflation also requires compression in profits. the annual growth in unit profits peaked at 9. 4 per cent in the last quarter of 2022 and stood at 2. 5 per cent in the fourth quarter of 2023. the march projections exercise foresees unit profit growth turning negative in 2024, implying that profits will buffer the relatively strong labour cost growth. unit profit growth is then expected to recover somewhat from 2025, helped by a robust economic recovery and strengthening productivity growth. chart 6 labour cost indicators ( annual percentage changes ) sources : eurostat and ecb calculations. notes : compensation per employee and per hour are

calculated from calendar and seasonally adjusted data. the latest observations are for the first quarter of 2024 for negotiated wages and the fourth quarter of 2023 for the rest. chart 7 wage trackers ( annual percentage changes ) sources : ecb, national central banks, central bank of ireland and the dutch employers ’ association ( awvn ). notes : euro area aggregate based on germany, france, italy, spain, the netherlands, austria and greece. the indicator " ecb wage tracker – average of agreements signed in last quarter including one - offs " displays the average growth rate of contracts signed in a given quarter in the first four quarters after signing. one - off payments are spread over the 12 months from the disbursement date. the latest observations are march 2024 for ecb wage trackers and april 2024 for indeed wage tracker. as shown in charts 8 and 9, feedback from firms participating in the corporate telephone survey ( cts ) and the survey on the access to finance of enterprises ( safe ) points to lower wage growth this year. the march 2024 staff projections foresee subsequent phases of further wage deceleration in 2025 and 2026, with the growth rate of compensation per employee declining from 5. 3 per cent in 2023 to 4. 5 per cent in 2024, 3. 6 per cent in 2025 and 3. 0 per cent in 2026. chart 8 cts wage expectations ( number of responses ) sources : april 2024 corporate telephone survey ( cts ) and ecb calculations. note : 54 responses for 2023 and 53 responses for 2024. chart 9 safe wage expectations one year ahead ( percentage changes over the next 12 months ) sources : survey on the access to finance of enterprises ( safe ) and ecb calculations. notes : survey - weighted mean euro area firm expectations of changes in wages of current employees. computed after trimming at the wave - country - specific 1st and 99th percentiles – all enterprises. the latest observations are for march 2024. finally, chart 10 shows some forecasts of near - term inflation dynamics for the rest of 2024. due to the swings in energy prices during 2023, there will be oscillations in base effects in the monthly inflation readings during 2024, while the staggered reversal of various temporary fiscal supports will also have uneven effects on price levels. both headline inflation and core inflation are expected to fluctuate around current levels for the rest of the year. chart 10