The European Central Bank published a box in its Economic Bulletin summarising recent ECB staff contacts with representatives of 71 leading non-financial companies operating in the euro area. Contacts reported a slight improvement in business conditions but continued modest growth in activity, with manufacturing still weighed down by tariffs, uncertainty and competitiveness challenges, while construction was slowly improving and services were supported by tourism and hospitality and by investment in software, data solutions and artificial intelligence. Consumer spending was described as lacklustre overall, with retailers seeing only modest growth amid cautious, price-sensitive consumers and increasing competitive pressures in areas such as clothing retail and international e-commerce, while demand for passenger cars remained flat amid regulatory uncertainty and weak electric-vehicle take-up relative to emission-reduction targets. Physical investment in machinery and equipment remained subdued as firms postponed larger decisions in response to geopolitical and policy uncertainty, tariffs and higher regulatory and labour costs, but spending on digital infrastructure and AI was reported as strong, particularly in the financial and public sectors. Employment feedback pointed to slightly declining headcount on average, concentrated in intermediate goods and automotive, alongside delayed hiring and greater reliance on temporary staffing. Contacts also reported a further slight slowdown in selling price momentum, mainly in services, and reconfirmed moderating wage growth, with quantitative indications implying wage growth slowing from 4.5% in 2024 to 3.3% in 2025 and to 2.6% in 2026. Reaction to the EU-US trade deal was mixed, but the impact on euro area activity and producer prices was still viewed as negative, with higher US tariffs largely passed on to US customers or absorbed in margins and limited spillover to euro area consumer prices so far.
European Central Bank 2025-10-31
European Central Bank firm contacts point to modest euro area growth and wage growth easing to 2.6% in 2026
The European Central Bank's Economic Bulletin notes slight improvements in euro area business conditions, with modest growth and challenges in manufacturing due to tariffs and competitiveness issues. Consumer spending remains weak, with cautious consumers and flat demand for passenger cars amid regulatory uncertainty. Employment is slightly declining, and wage growth is moderating, while investment in digital infrastructure and AI is strong despite geopolitical and policy uncertainties.