ECB Survey: Wage and Selling Price Growth Both Slow
N.R. Finch
The ECB's latest corporate survey shows euro-area firms now expect selling-price growth of 3.2% and wage growth of 2.5% over the next twelve months — both down, signalling the dreaded wage-price spiral has not taken hold.
What are companies actually saying?
Selling-price growth expectations fell from 3.5% to 3.2%; non-labour input costs (including energy) from 5.8% to 5.2%; wage growth from 2.8% to 2.5% — all three declining in step.
This means → firms feel neither the urge to raise prices sharply nor the pressure to hike pay, and cost-side anxiety is easing.
In plain terms = companies think the worst of the cost squeeze may be passing and are dialling back both price hikes and pay rises.
Why is the ECB relieved?
The bank's chief fear has been a wage-price spiral — rising prices push workers to demand higher pay, firms pass costs on, and the loop becomes self-sustaining.
This reflects the fact that energy-price increases have not fed through broadly into final selling prices or wages; second-round pass-through remains contained.
Yet inflation expectations themselves barely budged: firms still see 3.0% at both the one- and three-year horizons, with the five-year reading ticking up from 3.0% to 3.1% — all above the ECB's 2% target.
What does this mean for Thursday's rate decision?
Markets widely expect the ECB to hold the deposit rate at 2.25%.
But persistently high oil prices are fuelling bets on another hike in September.
This means → the simultaneous cooling in wage and price expectations hands the doves an argument for patience, yet unchanged inflation expectations give the hawks equal grounds to stay firm. Thursday's focal point: is this survey enough to make the hawks stand down?
Content is for reference only, not financial advice.