By Paul Hannon

Inflation rates have been rising across the developed economies over recent months, but there are few signs of a matching acceleration in wages that would ensure the pickup is sustained.

Figures released by the Organization for Economic Cooperation and Development Thursday show the quarter-to-quarter increase in labor costs across its 35 members slowed to 0.4% in the three months to September from 0.6% in the three months to June.

The OECD measures the labor cost of producing a unit of gross domestic product, which is calculated by comparing changes in wages with changes in productivity, or the hourly output of an average worker. If wages rise faster than productivity, unit labor costs rise, andthat can fuel inflation as businesses respond by raising their prices to cover higher outgoings.

In the third quarter, wages across the OECD rose by 0.6%, down from 0.8% in the second quarter, while productivity increased at an unchanged 0.2% rate.

According to separate OECD figures, the annual rate of inflation across its members rose to 1.4% in October from 1.2% in September, reaching its highest level since November 2014. But that remained well below the 2% rate that most central banks target.

Signs that inflation is on the rise have sent government bond yields higher over recent months. Bonds are sensitive to inflation because they typically pay fixed income and return the investor's initial investment years after it was made. Rising prices make both the income and the principal worth less in the future.

Expectations that inflation will pick up significantly next year have been fueled by promises of higher spending and lower taxes from U.S. President-elect Donald Trump.

Over recent months, however, the pickup in inflation has been driven by higher oil prices. But the slowdown in labor costs during the third quarter suggests that has yet to translate into broader inflationary pressures across developed economies.

A number of central banks have expressed a desire to see stronger wages growth in response to their efforts to boost inflation, including the Bank of Japan and the European Central Bank.

The slowdown in labor costs during the third quarter wasn't universal. While the U.S. saw a deceleration to 0.3% from 1.2%, and the U.K. a slowdown to 0.7% from 1.4%, labor costs rose at a faster pace in the eurozone and Japan, although the rate of increase remained very modest.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

December 15, 2016 06:14 ET (11:14 GMT)

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