ECB Survey: 40% of Euro Zone Firms Brace for Higher Wage Demands as Inflation Spreads

Euro zone companies are bracing for higher wage demands, with 40% of respondents to a European Central Bank survey expecting or seeing the risk of increased salary claims, up from 20% in the previous poll published in July. The ECB, which held interest rates steady on Thursday but hinted at a hike at its next meeting, is watching for signs that energy-fuelled inflation is feeding into wages. Wage growth is still expected to slow — from 3.2% last year to 3.0% this year and 2.9% next — but more gradually than in the prior survey round. Companies reported difficulty passing on higher costs: about 90% of consumer-facing firms said pass-through to selling prices was only partial or limited, versus less than half of businesses selling to other companies. Selling price growth was expected to moderate in coming months, though many firms see cost pressures persisting into next year as hedges expire and agricultural prices rise. Investment is increasingly concentrated in AI, cloud computing, data centres, defence and electrification. Outside these areas, industry remained subdued, with chemicals, food and textiles firms cutting investment.