Eurozone firms expect their turnover to keep rising this quarter but their margins remain under pressure with wage growth outpacing selling price increases, the European Central Bank said in a quarterly survey on Thursday.
Eurozone economic growth has been hovering just above zero for more than a year now and firms, which enjoyed unusually high margins in recent years, are now seeing a significant fall in these margins, fuelling fears they will start reducing headcount.
“The survey indicates that cost pressures remain widespread across businesses of all sizes,” the ECB said in its Survey on the Access to Finance of Enterprises. “Firms … continued to report a deterioration in their profits compared with the previous survey round.”
Businesses expect selling prices to rise by 3 per cent over the next 12 months while wages are seen rising by 3.5 per cent, the ECB said based on a survey of nearly 13,000 firms, most of which employ fewer than 250 employees.
A 3 per cent selling price increase is still well above the ECB’s 2 per cent inflation target and businesses see inflation at 2.9 per cent in one, three and five years.
Businesses reported a decline in the need for bank loans in the third quarter but they also said loans were more readily available than three months earlier.
However, they also became less optimistic about the availability of bank loans over the next three months, the ECB added.
