Investment Institute
Macroeconomics

Eurozone corporate profits outlook: How they could influence the ECB


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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    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

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