The European Central Bank (ECB) published findings from contacts with 64 leading nonfinancial companies operating in the euro area, indicating moderate activity growth in the third quarter of 2026 and expectations of unchanged momentum in the fourth quarter. Expansion remained uneven across sectors, while selling prices rose more strongly than anticipated amid higher costs. Expectations for a slowdown in wage growth also moderated compared with previous rounds of contacts. Business investment increasingly centred on artificial intelligence (AI), electrification, defence and aerospace, supporting demand for technology, equipment and infrastructure. Many other industries faced weak demand, high costs and intensifying import competition, while construction and real estate lost momentum. Consumer spending remained mostly subdued, with price sensitivity encouraging purchases of cheaper products, although most business and consumer services continued to grow. Headcounts declined in manufacturing and, to a lesser extent, services. Some services firms expected to meet rising demand through productivity gains, increasingly supported by AI, rather than additional hiring. Higher oil and gas prices linked to the Middle East conflict drove strong price increases in energy, transport and logistics. Capital goods prices also rose strongly, reflecting demand and surging memory chip prices associated with AI and data centre construction. Around 90% of contacts at firms serving consumers reported only partial or limited transmission of higher costs to selling prices, compared with less than half of those serving businesses. Selling price growth was expected to moderate in the fourth quarter, but cost pressures were expected to persist into 2027 as hedges expired and supplier increases fed through. Contacts expected wage growth to ease from 3.2% in 2025 to 3.0% in 2026 and 2.9% in 2027. Around 40% saw higher wage demands as an outcome or risk of the conflict’s inflationary effects, up from 20% in the previous round.
ECB reports moderate growth and stronger price pressures among euro area corporate contacts
The European Central Bank’s contacts with 64 leading nonfinancial companies indicated moderate euro area activity growth in the third quarter of 2026, with unchanged momentum expected in the fourth quarter. Investment linked to artificial intelligence, electrification and defence contrasted with subdued demand across many industries and declining headcounts. Selling price increases strengthened but were expected to moderate, while wage growth was projected to ease more slowly than previously anticipated, reaching 3.0% in 2026 and 2.9% in 2027.