Key facts
- Euro zone firms anticipate moderating wage growth and selling price increases.
- Selling price growth is expected to slow to 3.2% in the next year.
- Non-labour input costs are projected to rise by 5.2%.
- Wage growth expectations decreased to 2.5%.
- Firms' inflation expectations for one and three years ahead remained at 3.0%.
A European Central Bank survey indicates that firms in the euro zone anticipate a moderation in wage demands and selling price growth over the next 12 months. This suggests that the recent surge in inflation, driven by high energy costs, may not be translating into a persistent price spiral.
The survey of over 5,000 firms revealed that selling prices are expected to increase by 3.2% in the coming year, a decrease from the 3.5% projected three months ago. Projections for non-labour input costs, including energy, also saw a slight reduction, expected to rise by 5.2% compared to the previous 5.8% forecast.
Wage growth expectations eased to 2.5% from 2.8% in the prior quarter. Despite these moderating expectations for prices and wages, firms' overall inflation expectations remained largely unchanged, with one and three-year ahead forecasts holding steady at 3.0%, and the five-year expectation rising slightly to 3.1%.
This data is considered crucial for ECB policymakers as they prepare for their upcoming rate-setting meeting. While the ECB is widely expected to maintain current interest rates, high oil prices are fueling speculation about a potential further hike in the deposit rate in September.