BERLIN, (Reuters) – German collectively agreed wages saw a decline in growth this year despite rising inflation. This leaves consumers with less money, according to data on Thursday. It could impact household spending in Europe’s most populous economy.

Federal Statistics Office reported that the average increase in negotiated wages among unionized workers was 1.3%, the largest annual rise since 2010 when the office started compiling data.

Workers saw a drop in their real incomes due to rising consumer prices of 3%.

The euro area’s wage trends are closely monitored by policymakers and central bankers. They monitor wage trends in the euro area closely to determine if higher consumer prices are causing higher wages. If so, this could indicate a rise in inflation and cause a price spiral.

Future household spending will be affected by the decline in real wage growth. This was due in part to the supply shortages and problems within the industrial sector.

Restrictions to stop a fourth wave coronavirus infected are likely to impact retail sales and the business sector in the services industry, reducing Germany’s only pillar for growth during the third quarter.

Olaf Scholz (centre-left Social Democrats) is the new chancellor. He has pledged that he will raise the national min wage to between 25 and 12 euros per hour by next year.