Euro zone companies expect substantially higher selling prices and input costs due to the Iran war, adding to inflation concerns at the European Central Bank (ECB).
Firms anticipate a 3.5 per cent increase in selling prices over the next 12 months, according to the ECB’s most recent survey on the access to finance of enterprises, or SAFE. That’s up from 2.9 per cent in the previous round, an increase the ECB called significant.
Projected input costs rose to 5.8 per cent from 3.6 per cent. The ECB said daily responses collected before and after Feb. 28, when the conflict began, showed “firms questioned later in the fieldwork period had reported higher cost and price expectations.”
At the same time, inflation expectations also rose “markedly” for the one-year horizon — to 3 per cent from 2.6 per cent. For three and five years, they remained unchanged at the same level.
The poll — conducted Feb. 19-April 1 — comes days before the ECB next sets interest rates and has been highlighted by officials as a key input in assessing potential fallout from the fighting in the Middle East.
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The accompanying surge in energy costs is already pushing up inflation and weighing on economic sentiment in Europe, though the medium-term implications are still murky.
The ECB has signaled it will stand pat on Thursday, with officials keeping their options open and investors and economists seeing June as the likelier juncture for a hike.
While companies’ selling price and inflation expectations rose significantly, those for wages — a major focus for policymakers — moderated a touch, to 2.8 per cent from 3.1 per cent in the final quarter of 2025.
According to the ECB, companies reported an increase in rates on bank loans and other financing costs like charges, stable needs for credit and a small perceived decline in availability.
“As a result, the bank-loan financing gap – an index which captures the difference between the need for and the availability of bank loans – remained positive but was slightly lower at 2 per cent, down from 3 per cent in the previous quarter,” the ECB said. – Bloomberg
