Euro Zone Companies Struggle with Price Hikes Amid Chinese Competition

Companies in the euro zone are struggling to raise prices for consumers due to fierce competition from China, according to a European Central Bank (ECB) survey. The survey found that around 40% of companies reported price increases, particularly in intermediate goods and transport sectors, which are directly affected by oil prices.

However, for businesses closer to the consumer, there has been 'little adjustment' so far as households remain very price sensitive. As a result, around 40% of companies are seeing their margins squeezed due to higher costs not being compensated by a commensurate rise in retail prices.

The survey also noted that food retailers have seen customers shift away from branded products to private labels, and Chinese manufacturers are increasingly offering innovative products at low prices. This has led to European manufacturing firms focusing investments on Asia or eastern Europe rather than the euro area.