Companies report moderate growth as cost pressures persist
Contacts with 64 leading euro area non-financial companies told European Central Bank (ECB) staff that growth remained moderate. Higher costs lifted selling prices, but weak demand constrained pass-through, especially for consumer-facing firms.
Technology demand outpaces traditional industries
Exchanges held mainly between September 28 and October 7, 2026 indicated moderate third-quarter growth and unchanged fourth-quarter momentum.
AI, electrification, defence and aerospace supported investment, electronics, machinery and data centres.
Other industries faced weak demand, import competition and high costs; construction and real estate lost momentum.
Stricter import quotas and tariffs since July 1, 2026 helped steel.
Consumer spending remained subdued, especially in Germany and France, while digital services and tourism proved resilient.
Manufacturing and services headcounts declined overall, partly offset by hiring in IT, aerospace, defence and energy.
Firms cited productivity gains, increasingly supported by AI, as limiting recruitment needs.
Price resistance meets persistent costs
Third-quarter selling prices rose faster than anticipated, notably in energy, transport and capital goods.
Around 90 percent of consumer-facing contacts reported partial or limited cost pass-through, versus less than half of business-facing firms.
Contacts anticipated slower price increases but cost pressure into 2027.
Wage growth estimates were 3.2 percent for 2025, 3.0 percent for 2026 and 2.9 percent for 2027.
Around 40 percent saw higher wage demands or that risk from conflict-related inflation, up from 20 percent; most anticipated no notable wage impact.
Adaptation does not remove costs
Almost 80 percent of contacts reported higher costs from the Middle East conflict, while around 40 percent reported lower sector activity and 20 percent higher activity.
Assessments were roughly evenly split between better and worse outcomes than initially anticipated.
Firms cited adaptation and supply-chain resilience as offsets.