European companies predict a significant rise in prices for products and raw materials over the next 12 months, raising concerns about a potential intensification of inflation in the eurozone. According to the latest survey results, businesses expect prices to increase by approximately 3.5% over the year, up from a previous estimate of 2.9%. Expectations regarding raw material costs have surged sharply — to nearly 6%, signaling the risk of a trend towards rising prices.
This is reported by Finway
“The business survey showed: companies forecast an increase in prices of about 3.5% over the year. Previously, it was 2.9%. Estimates of costs have been revised even more sharply: expectations for raw material prices have jumped to nearly 6%.”
Geopolitical risks and energy pressure
The change in market expectations is closely linked to the tense situation in the Middle East. Following the escalation of the conflict surrounding Iran, companies have become more cautious in assessing their costs and are more frequently planning price increases. Among the key factors affecting businesses’ financial forecasts, experts highlight the rising costs of energy resources, which are already negatively impacting economic activity and business expenses in Europe.
More expensive loans and restrained wage growth
European companies report an increase in borrowing costs and financial expenses. Access to financing has become somewhat more complicated, although the gap between the demand and supply of loans has narrowed slightly. At the same time, due to rising costs, businesses are showing caution regarding wage increases: forecasts for salary growth over the next year have been slightly lowered. This may indicate a desire among businesses to tighten control over their expenses during a period of economic instability.
New inflation signals complicate decision-making for the European Central Bank: the regulator faces a dilemma between the need to curb inflation and support economic growth amid external shocks.