Euro zone firms struggle to pass on costs as consumer demand falters

Only a third of the euro zone's largest companies are raising prices in response to the Iran war, a stark departure from the widespread hikes seen after the 2022 invasion of Ukraine. This reluctance suggests that a cooling economy is significantly eroding the pricing power of major corporations.

A Reuters analysis of 175 earnings calls reveals that just 56 firms have moved to hike prices, contrasting sharply with the nearly two-thirds that did so following the onset of the Ukraine conflict. Back then, a combination of post-pandemic demand and massive fiscal stimulus allowed companies to easily pass on energy shocks. Today, the climate is defined by subdued growth and a less robust labor market, leading policymakers at the European Central Bank to consider a more patient approach to interest rate hikes.

Industrial and raw-material producers, such as BASF and Nexans, remain the primary group pushing costs onto buyers. In contrast, consumer-facing entities are largely holding the line; retailers like Delhaize are keeping prices low, while automakers are prioritizing cost-cutting over hikes. This divergence highlights a shift where businesses are finding it far easier to charge other firms than to extract more from individual households. Meanwhile, corporate strategy has matured, with more companies utilizing hedging and indexation clauses to absorb volatility rather than immediately offloading expenses to the end consumer.