Eurozone firms continue to face mounting challenges from rising costs, weak profits, and trade disruptions, according to the European Central Bank's latest Survey on the Access to Finance of Enterprises (SAFE), covering the second quarter of 2025. The survey found that 50 per cent of firms experienced increased input cost pressures over the past three months, while a net 13 per cent reported a decline in profits—particularly among small and medium-sized enterprises. Although turnover rose for a net 8 per cent of firms, optimism about the next quarter has softened, with a net 23 per cent expecting improvements, down from earlier survey rounds. Access to bank loans remained broadly stable. Firms reported little change in both demand and availability of loans, leaving the bank loan financing gap unchanged. Only 1 per cent of firms signalled a decline in loan needs, and just 1 per cent noted improved access. Firms also reported easing short-term inflation expectations. Median one-year-ahead inflation expectations declined to 2.5 per cent from 2.9 per cent, while expectations at three and five years remained steady at 3.0 per cent. Expected growth in selling prices and wages also moderated. Trade tensions, particularly those linked to new US tariffs, had a clear impact. About 30 per cent of firms reported supply chain disruptions, with exporters to the United States and manufacturers being the most affected. Many firms indicated they were adapting by refocusing sales on domestic and EU markets or restructuring their supply chains. The survey, conducted between 30 May and 27 June 2025, included responses from 5,367 euro area firms, 92 per cent of which were small and medium-sized enterprises. Attribution: Amwal Al Ghad English Subediting: M. S. Salama
