The European Central Bank (ECB) has released the 30th round of the Survey on the Access to Finance of Enterprises (SAFE), indicating a further tightening in euro area firms' financing conditions in Q1 2024. However, this tightening was less severe than that reported in Q4 2023.
An ECB press release reveals that out of 11,699 euro area enterprises that responded to the survey, the net percentages of firms reporting increases in bank loan interest rates and other financing costs—such as charges, fees, and commissions—fell from the previous quarter to 43% from 75% and 37% from 49%, respectively. Yet, the survey also unveiled a decline in both the need for bank loans, which fell from 4% in Q4 2023 to 1%, and in the availability of bank loans, dropping to a net 3% from 9%.
According to the press release, surveyed firms identified the general economic outlook as the main factor behind reduced external financing availability. This was reflected by a net percentage of -26%, down from -32%. Despite this, perceptions of banks' willingness to lend showed signs of improvement with a net percentage increase from 1% to 4%.
The press release further indicates that survey respondents experienced a decline in profits during Q1 compared to Q4, evidenced by a net percentage of -19%. While cost pressures persist across industries, some relief was noted for interest expenses. Looking ahead over the next year, firms predict a slowdown in growth for selling prices and wages: selling prices are projected to rise by an average of 3.3%, down from 4.5%, while wage growth is expected at around 3.8%, down from an earlier estimate of 4.5%.
The press release states that data collection for this iteration of SAFE took place between February 1st and March 12th, 2024, covering the period from October 2023 to March 2024. Half of the firms were surveyed about economic and financing conditions from October 2023 to March 2024, while the other half were questioned about conditions from January to March 2024.