Euro zone companies brace for higher wage demands, ECB poll shows

Euro Zone Firms Expect Higher Wage Demands Amid Cost Pressures, ECB Poll Finds

ECB Survey Reveals Wage and Cost Trends in the Euro Zone

Rising Wage Demands and Inflation Concerns

FRANKFURT, Oct 30 (Reuters) - Euro zone companies are bracing for higher wage demands from their workers after a surge in the cost of living caused by the Iran war, a European Central Bank survey showed on Friday.

The ECB, which kept interest rates steady on Thursday but hinted at a hike at its next meeting, is on the lookout for any sign that the recent, energy-fuelled rise in inflation is spreading to salaries.

Survey Results on Wage Expectations

Its quarterly survey of large euro zone companies showed that 40% of respondents were either expecting or seeing the risk of higher wage demands, up from 20% in the previous poll published in July.

Overall, wage growth was still expected to slow — from 3.2% last year to 3.0% this year and 2.9% the next — but more gradually than in the previous survey round.

Challenges in Passing Costs to Consumers

Consumer-Facing vs. Business-Facing Firms

Like in July, companies were struggling to pass on higher costs to consumers, who were increasingly looking for cheaper options.

Around 90% of respondents from consumer-facing firms said that the pass-through to selling prices was only partial or limited, compared to less than half among companies that sell to other businesses.

Outlook for Selling Prices and Cost Pressures

Accordingly, selling price growth was expected to moderate somewhat in the coming months, even if many companies expected cost pressures to continue into next year as hedges expire, agricultural prices rise and past price increases continue to feed through.

Investment Trends and Sector Performance

Growth Areas for Investment

Focus on Technology and Public Sector Demand

Investment was increasingly concentrated in AI, cloud computing, data centres, defence and electrification, with strong demand from public-sector and healthcare clients boosting software, engineering and renewable-energy firms.

Subdued Sectors and Challenges

Outside these growth areas, industry remained subdued. Trade protections aided steelmakers, but chemicals, food and textiles companies cut investment amid high costs, weak demand, foreign competition and rising political uncertainty.

(Reporting by Francesco Canepa;Editing by Aidan Lewis)