Investment Institute
Macroeconomic Research

Eurozone corporate profits outlook: How they could influence the ECB

  • 31 May 2024 (10 min read)

Key points:

  • The ECB has identified the evolution of profits as one of its key criteria for loosening monetary policy. Here we review the recent profits environment and the current outlook
  • Since the pandemic we have observed profit waves – with some sectors able to pass higher prices to consumers before others. But wages have tended to lag and have not caught up at all in some sectors
  • We highlight that the debate around so-called greedflation was not exaggerated in 2022. But it seems unit profits are normalising. Adopting ECB assumptions, we compute their implicit targets for profits for 2024 and 2025.
  • We believe that profit growth is likely to be more resilient than the ECB assumes. That remains consistent with our call that it will cut interest rates in June but will remain cautious thereafter (September and December 2024, two more in 2025).


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