Regional Network: A sharp rise in costs is weakening the outlook
Regional Network contacts report a sharp rise in prices, and this rise has accelerated through summer. At the same time, growth in activity has slowed. Contacts expect the rise in prices and costs and higher interest rates to contribute to a slight decline in activity ahead. Many contacts still report capacity constraints, but the share is smaller than in May. Nearly half of contacts are facing recruitment difficulties.
The rise in enterprises’ selling prices is the steepest measured since the start of the Regional Network survey in 2002. Over half of the contacts expect the rise in prices to slow in the coming year.
Contacts expect activity to fall through autumn and winter, with a sharp rise in prices and costs and higher interest rates having a dampening effect on demand ahead, particularly from households and construction clients.
The share of contacts reporting capacity constraints has increased markedly over the past year but has declined slightly through summer. The decline is broadly based. Contacts expect annual wage growth in 2022 to be to 4 percent, which is slightly higher than the May estimate.
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