ECB Survey: Eurozone Firms Face Greater Financing Difficulties as Inflation Expectations Rise

Title context: ECB Survey: Eurozone Firms Face Greater Financing Difficulties as Inflation Expectations Rise Text: A quarterly survey published by the European Central Bank on Monday showed that as fuel prices remain high and operating costs rise, eurozone firms are coming under heavy pressure on their finances and finding it increasingly difficult to obtain bank credit. Financing obstacles increase, banks become more cautious in lending The ECB has been gradually raising interest rates to curb energy-driven inflation. The market widely expects the ECB to hold steady this week to gather more evidence on how borrowing costs (including in the bond market) are affecting the economy. The ECB's latest quarterly survey showed some signs of strain in eurozone firms' access to financing. Firms widely reported rising loan interest rates and a decline in the availability of bank loans. When firms urgently need more credit lines, they are finding it increasingly difficult to obtain them. The ECB analysis said: "Firms' simultaneous increase in demand for trade credit and credit lines suggests they are facing broader working capital pressures, which may be driven by rising input costs." "However, the decline in the availability of credit lines also indicates that banks are becoming more cautious in providing such financing, which may further limit firms' ability to meet short-term funding needs," the ECB added. Data showed that in the three months through September this year, the share of firms reporting obstacles in obtaining bank loans rose to 7% from 5% in the previous quarter. Cost expectations heat up, inflationary pressure shows no sign of fading The survey also showed that firms' expectations for future prices, wages and other costs rose sharply, but the ECB noted that the results are biased because a large number of respondents were participating in the survey for the first time. Companies participating in the latest two survey rounds expected prices to rise by an average of 3.6% over the next 12 months, up from 2.5% in the second-quarter survey. Across the full sample of 12,822 respondent firms, companies expected sales prices to rise by 7.1%, a sharp jump from 3.2% in the previous survey. This set of data indicates that despite the ECB's continued rate hikes, inflation expectations on the corporate side remain elevated, and cost pressures have yet to ease substantially.