Euro Zone Firms' Outlook

FRANKFURT (Reuters) – Euro zone firms expect their turnover to keep rising this quarter, but their margins remain under pressure due to wage growth outpacing selling price increases, as revealed by the European Central Bank (ECB) in a quarterly survey on Thursday.

Economic growth in the euro zone has remained just above zero for over a year, and firms, which enjoyed unusually high margins before, are now facing significant falls in these margins. This trend has raised concerns about potential headcount reductions.

The survey indicates that cost pressures are widespread across businesses of all sizes. The ECB's Survey on the Access to Finance of Enterprises noted that firms continued to report a deterioration in their profits compared to the previous survey round.

Businesses expect selling prices to increase by 3% over the next 12 months, while wages are anticipated to rise by 3.5%. Approximately 13,000 firms were surveyed, most of which employ fewer than 250 workers. A 3% increase in selling prices exceeds the ECB's 2% inflation target, and businesses foresee inflation at 2.9% over one, three, and five years.

In the third quarter, businesses reported a decline in the need for bank loans but mentioned that loans were more accessible than three months prior. Nonetheless, they have become less optimistic about the availability of bank loans in the upcoming three months, the ECB noted.