By Francesco Canepa and Rob Lang
FRANKFURT, June 2 (Reuters) – Only a third of the euro zone’s largest companies have indicated they are raising prices in response to the Iran war, a Reuters analysis of listed corporate earnings commentary shows, suggesting a weak economy is curbing their pricing power.
Investors and European Central Bank policymakers have been trying to gauge whether the euro zone is facing another hefty bout of war-driven inflation like the one that followed Russia’s invasion of Ukraine.
For now, the answer appears to be no.
A Reuters analysis of 175 euro zone earnings calls, using AI-assisted reading, shows only 56 companies had raised or planned to raise prices in coming months, pointing to subdued demand across the 21-country currency area.
That finding is in stark contrast to the nearly two-thirds that did so in the period immediately following the Ukraine invasion, when an energy shock combined with post-pandemic demand and substantial fiscal support pushed inflation into double figures.
A CLEAR DIFFERENCE WITH 2022
“There is a clear difference between spring 2022 and spring 2026,” ECB policymaker Olli Rehn said while discussing Reuters findings in an interview.
“This time around, the labour market is less tight, growth is clearly more subdued, and we don’t have such strong fiscal policy stimulus for the moment,” the Finnish central bank governor added.
Inflation in the euro zone was already 5.9% when Russia invaded Ukraine in February 2022, while it was just 1.9% at the start of the Iran war four years later. Data due on Tuesday is expected to show it rising to 3.2% in May.
The weaker backdrop should ease pressure on the ECB to raise interest rates well beyond a well-telegraphed first hike next week, which economists say is largely intended to signal resolve against energy-driven inflation spilling into broader prices.
“For monetary policy, the implication is that the ECB can likely afford a bit more patience,” Allianz Global Investors’ chief economist Christian Schulz said of the results.
“The case for further tightening is less clear-cut and will require additional evidence on pass-through and underlying inflation dynamics.”
FEWER PRICE HIKES THAN AFTER UKRAINE INVASION
Reuters instructed a proprietary AI tool, Claude Cowork, to analyse the transcripts of 175 earnings calls conducted between April 2 and May 15.
The agent, which used the Opus 4.7 model, was told to look at whether companies discussed higher energy costs and if they were planning to pass them on to their customers, among other questions.
Of the 175 companies in the sample, 105 discussed energy costs during their earnings call and 91 linked the issue to the Iran war.
Excluding financial companies, which tend to treat energy shocks as a macroeconomic issue rather than a pricing one, 136 companies were analysed. Of these, 55 said they had raised or were planning to raise prices in the coming months.
Most increases were concentrated among firms directly exposed to the war’s effects on energy and raw materials, or in industrial goods. These included German chemical group BASF and French cablemaker Nexans.
Consumer-facing firms, by contrast, have been more reluctant to pass on higher costs. Retailers such as Delhaize have committed to keeping prices low, while automakers including Volkswagen are focusing on cutting costs instead.
That contrasts with spring 2022. Applying the same AI-assisted methodology to earnings calls from that period, 108 of 132 non-financial companies passed on higher costs, including many consumer goods firms, as pent-up demand and fiscal support boosted the economy.
EASIER TO CHARGE BUSINESSES MORE THAN CONSUMERS
The analysis suggested that companies selling to other businesses were finding it easier to raise prices than those dealing directly with consumers.
Among 33 industrial firms, 11 said they were passing on costs, three were planning to do so and two were implementing partial increases.
By contrast, Italian tyre-maker Pirelli was the only one among 26 consumer goods companies to confirm cost pass-through, with just four others considering similar moves.
Karsten Junius, chief economist at Switzerland’s Bank J. Safra Sarasin, said this divergence reflected growth profiles driven more by investment than by household consumption.
“The AI development and adoption race may make some companies less price sensitive such that higher input costs can be passed on more easily,” he said.
Even so, economists noted price pressures were still building in parts of the economy and should not be discounted.
Increases announced by transport firms such as Lufthansa and Deutsche Post — often via fuel surcharges — are likely to feed through to broader costs for businesses over time.
“The jury is still out on how persistent the price effects will be, and it’s far too early to sound the all-clear,” Spyros Andreopoulos, founder of the Thin Ice Macroeconomics consultancy, said.
A study by the Bank of Finland suggests it can take between two and 15 months for price rises in individual sectors to filter through into overall consumer inflation.
COMPANIES LEARN LESSONS FROM PREVIOUS PRICE SURGE
The analysis also suggests companies have absorbed lessons from the Ukraine shock.
Hedging — securing prices via long-term or derivative contracts — has become somewhat more widespread since 2022, reducing the urgency to raise prices.
Management at 74 companies in the sample said they had hedging in place, up from 68 four years earlier.
A slightly greater proportion of companies were taking advantage of indexation clauses, which allow companies to adjust prices automatically when input costs such as fuel rise.
A quarter of the companies planning to raise prices were making use of such clauses, versus 22% in 2022.
The companies in Reuters’ sample are typically large, globally exposed corporations listed on the Euro STOXX stock market index, meaning they may not reflect the reality of smaller firms.
But the findings chime with a European Commission survey of firms’ selling price expectations, which eased in May after a spike in April and are well below the level they reached in the spring of 2022.
(Reporting by Francesco Canepa; Editing by Toby Chopra)
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