Description

Firms report that their sales have moderated the declines of previous quarters and that costs have continued to show increases, although more slowly. Thus, although they continue to perceive a deterioration of their businesses, it has been less noticeable than what was described in the last Report. In this context, they add that their selling prices have increased slightly, and their margins are not as narrow as they were in the previous quarter. However, there are significant levels of heterogeneity among economic sectors, which indicate different degrees of slack in their operations depending on their links with the provision of goods or services.

Compared to November, firms report lower staffing levels. They also report lower efforts to search for workers and a slight increase in the frequency of layoffs. In this context, the general perception of the labor market is that it continues to be loose, but with different views among firms.

In the view of firms, financial conditions have become a little less negative. The share of firms responding that conditions have tightened further has decreased, while the share applying for a loan has increased compared to mid-2023. High interest rates and higher collateral requirements continue to be reported as the main reasons for the perception of a still restrictive financial scenario.

Looking ahead, firms expect their performance to improve over the next twelve months, approaching what they consider to be a normal result. They also expect slight increases in their staff over the next twelve months, although still below what they consider normal.

In the short term, expectations point to a slight rebound in sales during the next quarter, with cost and price variations tending to stabilize. In this scenario, they expect their profit margins to be not as narrow as in previous reports.

Expectations regarding financial conditions are not so different from what is currently perceived. In fact, the prevalence of firms that expect to apply for a loan during the next six months is similar to those that applied in the last six months.

In any case, when asked about their main concerns, uncertainty about sales during the year is consolidated, followed by labor costs and lending conditions.

Firms' inflation expectations for the next twelve months have tended to moderate, with a significant decrease in those expecting inflation to be well above normal, and an increase in those expecting inflation to be similar to normal.