MNI BRIEF: EZ Firms Predict Weak Start To 2024 - ECB Survey

The squeeze on incomes from high inflation and interest rates means many leading euro area firms are pessimistic about the outlook for 2023 and 2024 despite easing supply constraints, the ECB reported Friday, with wage growth expected to moderate in coming months.

The survey of 56 non-financial companies carried out between 25 September and 5 October found most reporting weakening activity consisted with a mild decline in output in Q3 and Q4 2023. With input costs stable, price rises continue to moderate. The outlook for employment was stable, but with some weakening expected.

Industry remains weak while transport and return were “subdued,” although strong growth was reported in digital services and tourism. Tightening financial conditions affected industry more than services, though a majority of respondents said expected further tightening will lead to an additional decline in activity.