Businesses in the Eurozone are bracing for a surge in prices: what’s behind it
27 April 14:45
Companies in the eurozone are increasingly signaling that prices will rise in the future. According to the European Central Bank, businesses expect prices for their goods and services to rise by an average of 3.5% over the next 12 months, up from the previous 2.9%, and the regulator itself calls this a “significant increase.” Bloomberg reports this, as cited by "Komersant Ukrainian".
The main driver is costs. Forecasts for production costs have deteriorated sharply, jumping from 3.6% to 5.8%.
The ECB directly points to the impact of the war in Iran.
“Firms surveyed later reported higher expectations regarding costs and prices,” the bank notes, comparing responses before and after the conflict began.
Overall inflation expectations are also rising
For the coming year, overall inflation expectations rose to 3% from 2.6% previously. At the same time, long-term estimates—for three and five years—remain stable.
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The energy sector is already playing a key role in this process.
Rising energy prices are driving up costs and dampening business sentiment. The ECB acknowledges that this “is already leading to higher inflation and negatively affecting economic sentiment.”
Against this backdrop, the market is closely watching the regulator’s decisions on interest rates. The ECB is not changing its policy yet, but is leaving room for action. Investors expect that the next decisions could be made as early as this summer.
Not all indicators are moving in the same direction. Despite rising prices and costs, wage expectations have fallen slightly—to 2.8% from 3.1%.
Another signal is the tightening of access to financing. Companies report more expensive loans and additional costs, although demand for financing remains stable.
“The spread on bank loans remained positive but narrowed to 2%,” the ECB notes.
What is known about the war in the Middle East
The war between Iran and its adversaries has become one of the key factors affecting the global economy. The conflict is accompanied by attacks on infrastructure, tensions in the Persian Gulf, and risks to strategic energy supply routes.
The escalation has led to rising oil and gas prices, as well as disruptions in the supply of certain raw materials. Logistics routes, particularly through the Strait of Hormuz, are under threat.
Blockade of the Strait of Hormuz
Since the start of the U.S. and Israeli military operation against Iran, Tehran has announced the closure of the strait.
In response, the U.S. imposed a naval blockade on Iranian ports and the coast and warned that it would pursue ships of Iran’s “shadow fleet” even in international waters.
On April 17, Iran announced the reopening of the waterway to commercial vessels—this occurred after Israel agreed to a 10-day ceasefire with the “Hezbollah” group.
Shortly thereafter, Iran revoked the permission, accusing Washington of “piracy.”
On April 19, the Islamic Revolutionary Guard Corps stated that ship traffic would resume once the U.S. lifted its naval blockade.
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