The European Central Bank (ECB) has released a survey on the Access to Finance of Enterprises: firms report moderate tightening of financing conditions.
As noted in the update shared by the European Central Bank, firms reported little changes regarding the availability of bank loans.
However, the ECB also noted that firms’ need for bank loans has “declined moderately, partly due to high internal funds.”
Substantially fewer firms have reported rising bank interest rates “on loans, although many indicated a further tightening of other conditions.”
Firms’ inflation expectations continued to “decline, with their median expectations for annual inflation in one, three and five years all standing at 2.9%.”
In the newest round of the Survey on the Access to Finance of Enterprises (SAFE), fewer euro area firms “reported increases in interest rates on bank loans (a net 4%, compared to 31% in the previous quarter) although a net 30% (28% in the previous quarter) signaled increases in other financing costs (i.e. charges, fees and commissions).”
In this survey round, a net 2% of firms reported a “decline in the need for bank loans in the third quarter of 2024, up from 1% in the previous quarter.”
At the same time, a net “1% of firms indicated an improvement in the availability of bank loans (down from 2% in the second quarter of 2024).”
This led the bank financing gap – the difference between “the need for and availability of bank loans – to decrease for a net 2% of firms (up from 1% in the previous quarter).”
Looking ahead, firms have become less optimistic “about the availability of bank loans over the next three months.”
Firms perceived the general economic outlook to be the main factor hampering the “availability of external financing to a higher extent than in the previous survey round (with a net percentage of -20%, up from -12%).”
A net 6% of firms indicated that their perceptions of banks’ “willingness to lend, which may reflect banks’ risk aversion, is improving (down from 9%).”
A net 7% of enterprises reported an increase in turnover “over the last three months, almost unchanged from 8% in the previous survey round.”
Firms were optimistic about developments in the next quarter and continued to report a deterioration in their “profits compared with the previous survey round (with a net percentage of -12%, from -10%).”
The survey indicates that cost pressures remain “widespread across businesses of all sizes.”
Firms expect selling prices to increase by “3% on average over the next 12 months (unchanged from the previous survey round), while the corresponding figure for wages was 3.5% (up from 3.3%.”
SMEs continued to report higher expectations for “selling prices and non-labour input costs than larger firms, while their wage cost and employment growth expectations were similar to those of large firms.”
Firms’ median expectations for annual inflation in “one, three and five years stood at 2.9%, 0.1 percentage points lower across all horizons. SMEs tended to report higher inflation expectations compared with large firms over all horizons.”
Firms’ short-term inflation expectations have closely tracked the “decline in HICP inflation over the past year, while long-term inflation expectations have remained more stable.”
The report published presents the “main results” of the 32nd round of the SAFE survey for the euro area.
The survey was conducted between 2 Sept and 15 Oct 2024.
