Some interesting stats from an article in Jurnalo an online European newspaper on the boom in the economies of CEE countries. Clearly the factor PS have predicted of consumers leading the boom is coming true - look at the car sales stats. But one wonders what effect the inevitable higher interest rates and stricter controls (and the risk of not meeting EU targets to enable countries to join the Euro when planned) will have.. "A sudden pickup in inflation combined with two big benchmark wage deals have helped to fuel fears about overheating in Central and Eastern Europe's fast-moving economies as concerns grow that the region could soon start pricing itself out of key markets.Highlighting worries that rising costs could begin to undercut the region's competitive edge, data released last week showed wage growth in private industry in Poland racing ahead by 9. 1 per cent year-on- year in March - beating analysts' forecasts of a 6. 2-per-cent increase. Inflation in Poland also jumped last month, climbing from 1. 9 per cent in February to 2. 5 per cent in March, as a result helping to trigger speculation that the nation's central bank will be forced to hike rates possibly as early as this week after leaving them on hold at 4 per cent for more than a year. The Polish data came as workers at Volkswagen AG's Czech offshoot, Skoda, secured a hefty 12. 5-per-cent wage rise for the rest of 2007 and a 13. 7-per-cent increase in 2008. High unemployment has meant that up until recently wage growth has been relatively modest in Central Europe. But a long run of solid economic growth has resulted in falling jobless numbers. Economists predict that unemployment in the 10 largely Central European states that signed up for European Union membership in May 2004 will edge down this year to about 8. 5 per cent. Unemployment in the region stood at 13. 2 per cent in 2003. The rise in wages also points to the risk that a tight labour market could start to emerge in the region's key economic sectors, especially as skilled workers are lured to other parts of the EU by higher wages. Indeed, real average wages in the Czech Republic came in at 2. 8 per cent last year, outpacing the nation's 2. 5-per-cent average inflation rate. Wages in Central Europe are still only a fraction of Western European levels, with its low-cost and highly skilled workforce one of the prime factors drawing in foreign investment especially into the new EU member states. But the recent signs of a pickup in pay scales in Central Europe also come against the backdrop of growing competition from other low- cost countries, not just in Eastern Europe but also in Asia. Further pointing to signs of overheating, data released this month showed Central European car sales racing ahead this year to outpace auto markets in Western Europe. Drawn up by the Brussels-based European Automobile Manufacturers' Association (ACEA), the data showed sales in the EU's new member states in Central Europe surging by 13. 8 per cent in the first three months of the year, underpinned by double-digit sales growth in several EU newcomers. March car registrations in Poland hit their highest level since the nation joined the EU, jumping by 29. 3 per cent last month, the ACEA said. Added to this have been a booming property business in parts of Central Europe as foreign money has flooded into what has been a long-undervalued real-estate market, and rising prosperity has encouraged local residents to buy their own home. While the surge in wages in Poland also underscores the growing labour shortages that have emerged in Central Europe's biggest economy and the Czech pay deal partly reflects the buoyant market for Skoda cars, analysts also believe that the two developments are a sign of a more general trend across Central Europe. "Domestic demand has accelerated all across Central and Eastern Europe, and the overheating zone is not far off in many of the new EU nations," said Lars Christensen, senior analyst with Danske Bank. "The situation is worst in the Baltic states - where recent inflation numbers have surprised strongly on the upside," he said. Indeed, official data showed inflation in Estonia and Latvia bounding ahead in March. While consumer prices in Latvia surged to 8. 5 per cent in March from 7. 3 per cent in February, inflation in Estonia soared to 5. 7 per cent last month. This resulted in the Estonian Finance Ministry revising up its 2007 inflation forecast to 4. 9 per cent from its previous forecast of 3. 9 per cent after stronger-than-expected domestic demand helped to power growth to what economists expect will be more than 9 per cent this year. Likewise, economic growth in Latvia is forecast to also top 9 per cent. Wages in the nation have surged by about 170 per cent over the last seven years. At the same time, car sales in Latvia soared by a staggering 73 per cent during the first quarter of the year. It was a story repeated across the Baltics, with Estonia posting a first-quarter increase of 48. 9 per cent in car sales and Lithuania chalking up a 28. 6 per cent jump." Huw