Cyprus employers confront persistent domestic cost pressures

Cyprus recorded a 3.8 per cent annual increase in hourly labour costs in the second quarter of 2026, as wage growth accelerated and employers faced higher costs associated with employing workers, according to figures from both Eurostat and the Cyprus Statistical Service (Cystat).

The increase in Cyprus was above the 3.1 per cent rise recorded across the euro area and the 3.2 per cent increase across the European Union during the same period.

Cystat data showed that the rise in Cyprus was driven by both wages and salaries and other labour costs, with hourly wages increasing by 3.9 per cent compared with the second quarter of 2025 and non-wage costs rising by 3.6 per cent.

The overall increase was also slightly faster than in the first quarter of 2026, when hourly labour costs in Cyprus had risen by 3.4 per cent year on year.

It was also marginally above the 3.7 per cent annual increase recorded in the second quarter of 2025, indicating that the pace of growth in labour costs picked up during the latest quarter.

The Cystat figures showed that wage growth accelerated from 3.4 per cent in the first quarter, while the increase in non-wage costs rose from 3 per cent.

The unadjusted total labour cost index in Cyprus reached 121.87 in the second quarter, compared with 119.43 in the previous three months and 117.38 a year earlier.

The index for wages and salaries rose to 122.20, from 119.79 in the first quarter and 117.64 a year earlier.

The corresponding index for non-wage costs stood at 120.48, up from 117.92 in the first quarter and 116.33 in the second quarter of 2025.

The indices use 2020 as their reference year, with that year set at 100, the statistical service noted.

On a quarter-on-quarter basis, and after seasonal adjustment, total hourly labour costs in Cyprus increased by 1 per cent in the second quarter.

Wages and salaries also rose by 1 per cent compared with the previous quarter, while non-wage costs increased by 0.9 per cent.

The quarterly increase was stronger than that recorded in the second quarter of 2025, when seasonally adjusted total labour costs and wages and salaries each rose by 0.6 per cent, while non-wage costs increased by 0.5 per cent.

Eurostat data also showed that, within the business economy, Cyprus recorded annual labour-cost growth of 4.3 per cent in the second quarter of 2026, compared with 4.4 per cent in the first quarter and 4.1 per cent in the second quarter of 2025.

Across the euro area, total hourly labour costs in the business economy rose by 3 per cent in the second quarter of 2026, down from 3.3 per cent in the first quarter and 4.5 per cent a year earlier.

In the euro area, wage costs increased by 3 per cent in the second quarter, while non-wage costs rose by 3.2 per cent.

Across the EU, business-economy labour costs increased by 3.1 per cent in the second quarter, following growth of 3.5 per cent in the first quarter and 4.8 per cent in the second quarter of 2025.

EU wage costs rose by 3.1 per cent, while non-wage costs increased by 3.2 per cent.

Looking across the wider economy, Eurostat said hourly labour costs in the euro area increased by 3.1 per cent year on year in the second quarter, while the corresponding increase in the EU was 3.2 per cent.

In the euro area, labour costs increased by 2.9 per cent in industry, 3.9 per cent in construction and 3 per cent in services.

The EU recorded increases of 3 per cent in industry, 3.9 per cent in construction and 3.1 per cent in services.

Construction therefore recorded the fastest labour-cost growth among the three broad business sectors in both the euro area and the EU.

At EU level, the largest increases in hourly wage costs were recorded in real estate activities, at 5.7 per cent, followed by other service activities at 5.1 per cent and administrative and support services at 4.8 per cent.

The smallest increase was recorded in mining and quarrying, at 1.5 per cent, followed by arts, entertainment and recreation at 1.7 per cent, while professional, scientific and technical activities recorded a 0.4 per cent decline.

For non-wage costs, the largest EU increases were recorded in other service activities at 5.7 per cent, real estate activities at 4.9 per cent and administrative and support services at 4.8 per cent.

The smallest increase was recorded in mining and quarrying, at 0.7 per cent, followed by professional, scientific and technical activities at 1.6 per cent and electricity, gas, steam and air conditioning supply at 1.7 per cent.

Among EU member states, the strongest annual increases in hourly wage costs during the second quarter were recorded in Bulgaria at 9.9 per cent, Lithuania at 9.6 per cent and Croatia at 8.9 per cent.

The lowest increases were recorded in Luxembourg and Romania, both at 1.8 per cent, followed by France and Italy at 2.1 per cent.

The figures provide a broader picture of the cost pressures facing employers, with Cyprus recording faster annual growth in total hourly labour costs than the EU and euro area averages during the second quarter, while the domestic data also show that the pace of increase strengthened from the start of the year.