Labour Cost Index in Eurozone

Measures the year-on-year change in total hourly labour costs in the euro area (business economy, excluding public administration, education, health and non-market activities), covering both wages and employers' social contributions. It is published by Eurostat and adjusted for calendar effects.

Eurostat compiles the Labour Cost Index (LCI) from the national institutes' harmonised labour-cost surveys. It combines wages and salaries with employers' social contributions (net of subsidies) per hour actually worked and expresses it as a year-on-year rate of change on a base index.

One of the indicators the ECB watches most closely to gauge wage pressure on core inflation: labour costs rising faster than productivity push prices higher, whereas a slowdown supports the disinflation process and paves the way for rate cuts.

By excluding the public sector, education and health, it fails to capture wage developments in those areas. It is also an aggregate of economies whose national survey methodologies may differ in coverage and revision schedule, and it is released with a lag.