Euro zone firms have recorded a further slowdown in business momentum but overall economic growth is likely to remain positive as expansion in services offsets a manufacturing recession, a European Central Bank (ECB) quarterly survey of firms showed.
The euro zone economy is barely growing as Germany, its biggest economy, could be in recession and the ECB lowered rates for the third time this year on Thursday in hopes of arresting any further decline.
The souring mood among the 95 large non-financial firms surveyed reflected growing concerns about competitiveness, uncertainty about the green transition, high costs and worries over political developments.
“This was causing businesses to scale back investment and focus on cost cutting, which also weighed on consumer confidence,” the ECB said, based on the survey which was conducted on Sept. 16 to 26 and published on Friday.
“Overall activity tended to be below prior expectations, mainly in Germany and France, but was generally more resilient elsewhere,” the ECB added.
All this adds up to a further moderation in price growth, the firms said, possibly bolstering the case for the ECB to cut interest rates quickly.
‘Hospitality demand is there, but there is no margin anymore’
The automotive sector was among the weakest and this had a knock on effect on the broader manufacturing sector as overall demand was weak and demand for battery electric vehicles was also waning, the ECB added.
“Contacts pointed to a deteriorating global economic and political environment, including, most notably, the slowing and increasingly self-sufficient Chinese economy, which was dampening export demand and intensifying import competition,” the ECB said.
Firms said they did not expect much change to the overall subdued growth environment in the short term and their employment expectations were also muted as they focus on raising efficiency and productivity. – Reuters
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