In One Year, EU Services Prices Rose While Energy Prices Fell

The component that lags

Consumer prices divide into goods and services, and the two behave differently. Goods prices follow commodity costs, exchange rates and shipping, all of which move quickly. Services prices follow wages, which move slowly and infrequently.

In 2025 that difference produced a clear result. Energy fell 0.6% across the Union, food rose 2.8%, and services rose 3.7% — faster than either, and faster than the headline rate.

Why services move last

A restaurant meal, a haircut, an insurance policy and a plumber's visit are mostly labour. When labour costs rise, service prices follow, but only once contracts are renegotiated and price lists reprinted.

The wage increases that followed the 2022 energy shock were agreed through 2023 and 2024, and they reach service prices afterwards. That lag is why services inflation is still elevated in a year when the shock that caused it has reversed.

The unit labour cost study on this site records the underlying movement: EU unit labour costs rose 19.1% over five years, and considerably more in several Member States.

Where it is fastest

Estonia records 9.6%, Romania 8.0%, Slovakia 8.0% and Hungary 7.5%, with Croatia at 7.4% just behind. Three of the four leaders here are also among the five highest on the unit labour cost ranking: Hungary at 166.2, Romania at 145.0 and Estonia at 143.9. Croatia sits seventh on that ranking, at 135.2.

Estonia's 9.6% is more than four times the French rate in the same year, inside the same currency union.

Where it is slowest

France records 2.2%, Luxembourg 2.5% and Italy 2.9%, with Denmark level with Italy at 2.9%.

Italy at 2.9% and France at 2.2% are the two large economies whose labour costs per unit of output rose least over the same five years, and their services inflation follows. Cyprus and Greece are the cases that do not follow: their unit labour costs rose less than anywhere else in the Union, and their services prices still rose 4.3% and 4.8% respectively, both above the EU rate.

What this implies for monetary policy

A central bank looking at a headline rate close to target in 2025 was looking at a number held down by falling energy and held up by services.

Energy will not fall indefinitely. If services inflation persists at 3.7% while the energy contribution returns to zero, the headline rate rises without anything new happening. That is the reason services inflation is watched more closely than its share of the basket would suggest, and why the dispersion across Member States — 7.4 percentage points, derived here as Estonia's 9.6% less France's 2.2% — matters for the single monetary policy the twenty Member States of the euro area shared in 2025.