Main findings from the ECB’s recent contacts with non‑financial companies

Prepared by Alex Melemenidis, Richard Morris and Moreno Roma

This box summarises the findings of recent contacts between ECB staff and representatives of 72 leading non-financial companies operating in the euro area. The exchanges took place between 23 June and 2 July 2025.^[1]

Contacts reported a slowdown in activity in recent months as tariffs, geopolitical tensions and the resulting uncertainty dented business and consumer confidence (Chart A and Chart B). The feedback from contacts was consistent with very modest growth in both the second and third quarters. While manufacturing orders had been recovering in the first months of the year, many contacts indicated a loss of momentum at some point during the second quarter. Growth in services also appeared to have slowed down.

Chart A

Summary of views on activity, employment, prices and costs

(averages of ECB staff scores)

In the manufacturing sector, the positive start to the year appeared not to have been sustained. While reports varied, many contacts said that they had been positively surprised by developments in the first months of the year, but that orders had started to slow down at some point during the second quarter. This pattern of demand was most commonly described by contacts in the intermediate goods sector as well as by some producers of capital goods and consumer durables. Opinions were divided on whether this slowdown was caused by an unwinding of the frontloading of exports in anticipation of potential US tariff increases or a broader softening in demand. Nevertheless, there was widespread consensus on the increasing role of import competition, especially from China. Despite the more subdued sentiment this round compared with three months ago, there were still some positive developments. For instance, the pharmaceutical industry continued to experience strong growth, supported by frontloading ahead of higher tariffs. Additionally, demand for semiconductors and heavy goods vehicles showed signs of recovery. Contacts in or supplying the construction sector were also more optimistic, maintaining their view that activity was picking up, supported by recent declines in interest rates.

Chart B

Views on developments in and the outlook for activity

(averages of ECB staff scores)

Reports on consumer spending and services activity also pointed to some loss of momentum. Contacts in the consumer goods and retail sectors described activity as rather flat overall. Most notably, manufacturers of consumer electronics and household appliances, who had been more optimistic in the previous survey round, now reported sluggish or declining business. Retailers of clothing and other personal equipment also painted a similar picture of persistently weak spending. Food retailers and their suppliers again emphasised how price sensitivity among consumers remained very high, often citing poor or declining consumer confidence. In the tourism services sector, contacts reported that growth was moderating, albeit at a high level. Popular tourist destinations faced continued capacity constraints in hotels, and consumers were becoming more price sensitive, increasingly booking last-minute and cutting back on other travel-related spending, such as dining out. Other business and consumer service providers described somewhat mixed developments: IT-related services in particular still experienced solid growth, but the overall market environment remained challenging.

With growth momentum weakening, the employment outlook also deteriorated slightly. Headcount reductions were still prevalent – or had even intensified – in the manufacturing sector, reflecting weak demand, overcapacity and ongoing restructuring in many firms. Furthermore, employment was said to be stabilising or even declining in parts of the services sector which had previously shown strong growth, such as tourism. Placement agencies continued to report a challenging environment, especially for white-collar roles and permanent job placements, which were still falling as firms delayed hiring decisions and favoured temporary staffing solutions. There were, however, pockets of growth, most notably in the construction (despite perceived labour shortages), energy, defence and pharmaceutical sectors.

Chart C

Views on developments in and the outlook for prices

(averages of ECB staff scores)

Contacts reported a slight slowdown in selling price momentum in recent months (Chart A and Chart C). This was mainly driven by developments in manufacturing, and in particular in the capital and intermediate goods sectors, where prices were falling as a result of weaker demand and increased import competition, as well as easing non-labour input costs. This contrasts somewhat with the more optimistic picture of recovering prices painted a few months ago. Price growth across much of the services sector remained relatively robust, particularly in transport and tourism services (partly driven by regulatory costs and capacity constraints). However, contacts in the retail sector and in services such as consultancy, IT and telecoms tended to report moderate – or moderating – price growth in the face of strong competition and cost-conscious customers.

Contacts remained confident that wage growth was moderating (Chart D). On average, the quantitative indications provided would imply that wage growth is expected to slow, from 4.5% in 2024 to 3.3% in 2025 and further to 2.8% in 2026. While these indications are 0.2-0.3 percentage points above those in the previous survey round, they still point to the same direction of travel.^[2]

Chart D

Quantitative assessment of wage growth

(percentages)

The effect of US tariffs on activity and prices in the euro area was mostly viewed as being negative at present, albeit with little to no impact on final consumer prices. The downward pressure on both activity and prices reflected reduced demand, in part caused by trade diversion from Asia (and China in particular) as exporters from the region sought alternatives to the US market. This was exacerbated by the appreciation of the euro. Consistent with this trend, contacts in the transport and logistics sector pointed to strong growth in imports and a decline in exports. So far, increased import competition mainly affected intermediate goods and in particular more commoditised, upstream products. However, contacts expected this to extend to downstream products with higher value-added content in the coming months and quarters. By contrast, contacts in the retail and consumer services sectors reported minimal, if any, impact on their activity or prices to date, and did not anticipate much impact in the near future.