Key facts
- BusinessEurope said more than half of respondents were very concerned about inflation, up from 40% in June.
- BusinessEurope said more than half of members considered their own government's fiscal stance too expansionary.
- BusinessEurope said a wide majority of members believe the European Central Bank's stance is appropriate.
- BusinessEurope said investment expectations rose, particularly for industry, though forecasts for investment growth this year were revised down.
- BusinessEurope said rising debt, higher interest costs and delayed consolidation are a growing source of vulnerability in several member states.
Sentiment among European companies improved across industry and services since June, but concerns about inflation and sovereign debt grew, according to a survey BusinessEurope published on November 12. The association, which represents 42 federations with a combined 25 million businesses, said the share of manufacturers with negative sentiment nearly halved to 26% from 50% in June. In services, the share fell to 30% from 50%.
Investment expectations rose, particularly for industry, the twice-yearly survey found, though forecasts for investment growth this year were revised down. More than half of members said they were very concerned about inflation, up from 40% in June, while just under half said they were slightly concerned.
Eurozone inflation reached a three-year high of 4.0% in October on rising food and energy costs, with energy inflation at 20%. Inflation has climbed above the ECB's 2% target this year as the US war with Iran pushed energy costs higher for a bloc that imports most of its energy.
BusinessEurope members also grew more critical of national fiscal policy. More than half now consider their own country's fiscal stance too expansionary, while a wide majority believe the ECB's stance is appropriate. "In several (EU) member states, the combination of rising debt, higher interest costs and delayed consolidation is becoming a growing source of vulnerability, as markets are increasingly sensitive to fiscal risks," BusinessEurope said in its report. Financial markets have driven up borrowing costs for France and other European countries seen as having weak government finances.