The European Central Bank published a summary of recent contacts between ECB staff and representatives of 79 leading non-financial companies operating in the euro area, indicating gradually improving business momentum led by an incipient recovery in industry. The feedback was consistent with small improvements in economic growth in the first and second quarters of 2025, with manufacturing and construction seen as having reached or passed their troughs, while services growth was broadly steady. Consumer spending signals remained mixed, with many consumer goods producers reporting good or recovering demand but retailers describing subdued activity amid inflation-related caution and uncertainty. Contacts reported early signs of recovering orders for machinery and equipment and improving construction activity as declining interest rates began to have an effect, while some business service providers cited customers pausing large projects. Employment expectations improved slightly but remained relatively flat as firms relied on attrition, hiring freezes and early retirement rather than layoffs; hiring difficulties eased compared with recent years, but placement agencies continued to report falling job placements. Price growth was described as moderate and broadly unchanged in momentum, with some convergence as manufacturing price rises picked up and services price rises softened slightly; contacts also became more confident that wage growth was moderating, with a simple average of quantitative indications implying wage growth slowing from 4.3% in 2024 to 3.0% in 2025 and 2.5% in 2026. When asked about the impact of tariff and defence spending announcements (up to mid/end-March), most firms had not reassessed their outlook, though slightly more reported a positive reassessment driven by defence spending. Tariffs were largely treated as a risk rather than part of the baseline, but had already led some firms to pause investments and reassess dependence on inputs from the United States; those expecting tariff effects anticipated lower activity and, on balance, higher prices. Companies viewed planned increases in defence spending, including digital and cybersecurity, as potentially supporting activity relatively quickly, while also flagging possible inflationary and interest rate pressures and upward price effects via higher demand for materials, components and skilled labour.
European Central Bank 2025-04-22
European Central Bank company contacts with 79 euro area firms point to improving industrial momentum and moderating wage growth
The European Central Bank's discussions with 79 leading non-financial euro area companies show gradual business momentum improvement, driven by a nascent industry recovery. While consumer spending signals remain mixed, early signs of recovery in machinery orders and construction activity are noted, alongside moderate price growth and easing hiring difficulties. Companies are cautiously optimistic about increased defence spending, though tariffs pose a risk, potentially leading to investment pauses and higher prices.