Description

The firms report that, in recent months, their performance has stabilized or slightly improved compared to the third quarter of 2024, due to a not so negative perception of sales. In any case, the somewhat greater than expected increase in costs is a cause for concern; in particular, due to a context in which selling prices have not changed much while margins continue to narrow.

The firms further report that, in the near future, there will be an increase in the degree of pass-through of higher costs to prices compared to what has been the trend in recent times. At the same time, they indicate that this pass-through will be faster than in the past. Thus, they anticipate that the pass-through of costs to prices will be more in line with what they believe to be the norm.

About employment, respondents report no significant changes in their staffing levels, despite some marginal deterioration. The fraction of firms reporting a need to hire workers has increased slightly, as has the proportion of those stating that it has become more difficult to find them. The firms interviewed agree that this greater difficulty owes to a lack of the necessary skills on the part of applicants and rather than to a shortage of people looking for jobs. Meanwhile, the share of firms reporting that they have made layoffs in the last quarter has decreased slightly, while those reporting that they have made layoffs are closer to their usual levels.

Financial conditions are still perceived as tight, although somewhat less so than in recent quarters. The level of interest rates and the difficulties in renewing loans have become less relevant in this perception, in contrast to the demand for collateral, which has become more important. A higher percentage of firms that applied for loans were approved in the conditions they expected, in a context where the demand for financing remains unchanged. For their part, banks report that credit applications remain weak, and reiterate the existence of strict policies in the evaluation of their clients, with the latter's economic activity being an important factor to consider in their decisions.

With respect to expectations for the short term, the firms foresee that their costs and sales will remain stable, with prices rebounding slightly and margins narrowing further. Regarding loan applications, the proportion of firms that anticipate applying for a loan in the next three months remains stable from the previous quarter.

The firms' expected performance are improving for the next twelve months, although several of them are cautious in their projections, concerned about the possibility that their recent improved perception may be temporary. At the same time, the firms' staffing expectations remain stable, as some of them worry that labor costs will possibly increase again.

Inflation expectations for the next twelve months remain stable with respect to the previous Report, as a majority of respondents expect inflation to rise above normal.