Overall, 92% of companies with physical points of sale accept cash
Cash acceptance rebounds after decline observed during and after pandemic
Cash widely valued for privacy and reliability, while acceptance of mobile payments rises sharply

According to the latest survey on the use of cash by companies in the euro area published today by the European Central Bank, cash acceptance has rebounded slightly.
In 2026, 92% of companies selling goods and services in physical locations in the retail trade, restaurants and cafés, hotels, and arts, entertainment and recreation sectors reported that they accept cash. This compares with 90% in 2024, suggesting that cash acceptance has rebounded after the decline observed during and after the pandemic.
Overall, cash is the most widely accepted payment method in the euro area. Acceptance of card payments remained broadly stable at 88% between 2024 and 2026, while acceptance of mobile payments rose sharply from 36% to 68% of companies over the same period.
At the same time, 25% of companies in the euro area report that they have taken steps to promote digital payments. The measures include investing in tills that accept cashless payments or reducing the number of tills that accept cash. In the euro area, 13% of companies have introduced self-checkout terminals.
When deciding which payment methods to accept, companies most often cite consumer preference, security and ease of handling as the main considerations. Compared with digital payment methods, they continue to see major advantages in accepting cash, such as privacy and reliability.
The survey covered 8,205 companies across all 21 euro area countries. Interviews were conducted between February and April 2026.
 
 
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From 12 August 2026, new rules on packaging and packaging waste apply in the EU. This will change the way products are packaged to protect the environment and people’s health. It will also create opportunities for businesses.
Packaging uses large quantities of raw materials and generates waste that ends up in landfills or the sea. Some chemicals used in packaging can also be harmful. The new rules address these issues by setting requirements for the manufacturing and composition of all packaging placed on the EU market. They also require packaging to be reusable or recoverable, meaning it can be used again or turned into something else after use. From 2030, certain single-use packaging will be banned where more sustainable alternatives are available, such as small ketchup packets or mini shampoo bottles in hotels.
The new measures will make packaging

less wasteful: plastic packaging must be made in part from recycled content, with increasing targets for 2030 and 2040
fully recyclable: all packaging must be recyclable by 2030, so its components can be used for something else afterwards
clearly labelled: clear labels and colours make it easier to sort trash for recycling – showing what it is made of, where to bin it, and how to return it for reuse
smarter: unnecessary packaging and empty space in deliveries will be reduced
easier to re-use, refill and collect: deposit and return systems will be boosted. Companies must make reuse or refill options available whenever possible, with no extra charge
fairer and safer: brands using non-recyclable or environmentally harmful materials will have to pay to clean them up. Harmful and cancer-causing ‘forever’ chemicals (PFAS) will be restricted in food packaging

The EU is working to protect and improve the environment and build a more circular, sustainable, and competitive economy. The law on packaging addresses the environmental challenges caused by packaging waste, harmonises rules for businesses across the single market, and creates opportunities for businesses involved in recycling and sustainable packaging solutions.
 
 
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Blog | Retail fuel prices have surged in 2026 following the outbreak of the conflict in the Middle East, driving up euro area energy inflation. In this blog, we examine the factors that drive fuel price dynamics at the pump.
Rising oil prices amid the conflict in the Middle East have put the public spotlight back on fuel costs and their potential impact on inflation. This blog post explains how changes in crude oil prices feed through to what consumers pay for petrol or diesel at the pump. To do so, we take three steps.
First, we break down prices into three components − crude oil, refining and distribution margins, and taxes − and show how these prices reacted to changes in oil prices within weeks and the pass-through was complete. Second, we explain why a 10% increase in oil prices does not automatically translate into a 10% increase in fuel prices, as taxes and other fixed cost components dampen the pass-through. And third, we examine the role of refining margins, which can at times amplify the impact of oil price shocks on fuel prices, household budgets and inflation.
Oil price rises are transmitted fast and fully to retail fuel prices
In general, the prices for refined fuel and crude oil move pretty much in lockstep from month to month, although refined products (in particular diesel) have outpaced crude at times since 2022. This is a first sign of the role played by refining margins, to which we will return later.
To better understand how the recent oil price shock made it to the price of diesel at the petrol station, we need to trace the transmission mechanism. Prices for Brent crude rose rapidly in March after the outbreak of the conflict in the Middle East, peaking at 138 US dollars per barrel in early April (Chart 1). This is almost double the level seen in late February. To produce diesel, crude oil is processed in a refinery. On this occasion, prices of diesel after the refining process rose even faster than prices of crude oil, peaking at 197 US dollars per barrel in April. This resulted in ever higher prices at the pump. By the first week of April, retail diesel prices averaged €2.18 per litre across the euro area compared with €1.63 per litre in late February – a sizeable jump of a third. Rising crude oil prices thus fed quickly into rising consumer prices, as they usually do. In general, the pass-through is fast, within one or two months, and complete. Rather than being absorbed by lower profit margins, an increase of €0.10 per litre in crude oil prices usually translates into an increase of €0.10 per litre in pre-tax pump prices.
While the pass-through from oil prices to pump prices is complete in levels, in relative terms retail prices increased less. To understand why, we need to look at all the other components that make up consumer prices. And this also helps us comprehend why diesel prices rose by €0.55 against only €0.35 for crude prices.

Chart 1
Developments in energy-related prices

a) Brent crude and refined petrol and diesel prices

b) Petrol and diesel prices and HICP

(US dollars per barrel)

(index: 2025 = 100)

Sources: LSEG, European Commission and ECB calculations.
Notes: In panel a), the latest observations are for 28 July 2026. In panel b), the levels for petrol and diesel reflect the impacts of crude oil prices, refining costs and margins distribution costs and, margins, excise duties and taxes, derived from the European Commission’s Weekly Oil Bulletin (WOB). HICP stands for the Harmonised Index of Consumer Prices measure of inflation. The latest observations are for June 2026 for HICP inflation and the week of 20 July for diesel and petrol prices.

In relative terms, retail prices increase less than crude prices
The prices of crude oil and refined diesel rose by over 90% between the end of February and the first week of April (peak since the outbreak of the Middle East conflict), whereas diesel prices at the pump increased by around “only” 34% (Chart 2, panels a and b).[2] Similar dynamics applied to petrol. The reason for this is that a large share of the retail price is fixed and does not move with oil market prices.[3]
Price elasticities – how much retail prices change in percentage terms when input prices change – vary along the five components that make up the price at the petrol station:

Crude oil is highly sensitive to both supply shocks (like the Middle East conflict) and demand shocks (like the COVID-19 pandemic). Since 2021 the crude oil component has averaged around €0.47 per litre of diesel, ranging from €0.28 to €0.80. At its most recent peak in the first week of April, it reached €0.73 (a 92% increase compared with the end of February).
Refining costs and margins are calculated as the difference between the contribution of refined product prices and the contribution of crude oil prices. This spread captures the additional costs and gross margins associated with all steps between crude oil arriving at the refinery and usable fuel leaving it. In the last week of February, they contributed €0.13 to the retail price of diesel, in line with the historical average from 2021. As mentioned above and detailed below, this price component was amplified during the recent energy shock (a 168% increase compared with the end of February).
Distribution costs and margins cover all activities between refining and the final sale of the product. These include transporting the product to the local retail outlet, marketing expenses and the costs of operating the outlet (e.g. rents and wages). Distribution margins absorbed part of the increase in diesel refining, falling by 14% compared with the end of February.
Excise duties are taxes levied at a fixed amount per litre that rarely changes, averaging €0.52 (diesel) and €0.66 (petrol) in the euro area since 2021. Several countries have temporarily cut excise duties to dampen the inflationary impact from the energy shock for consumers, as they did after Russia invaded Ukraine. These duties declined by around 8% compared with the end of February. In most cases, the latest measures expired in June this year.
Value added taxes (VAT) are levied as a fixed percentage of the pre-tax consumer price and excise duties (currently around 19-22% in most countries). Thus, they rise and fall with the pre-tax price but add no independent volatility. VAT accounts for roughly one-sixth of the retail price. The VAT component increased by 24% compared with the end of February (hence less than the retail price percentage change due to a cut of around 8% to the average VAT rate across the euro area, from 20.7% to 18.9%).

As excise duties and VAT together make up a big, largely fixed share of the price, a given percentage increase in crude oil prices translates into a much smaller percentage move at the station.
The renewed escalation of the conflict since early July has pushed pump prices back up, to around €1.98 per litre of diesel in the third week of July – with refining margins again playing an important role (Chart 2, panel d).
Chart 2
The journey: before and during the shock

a) Retail diesel price in the last week of February

b) Retail diesel price in the first week of April

(cent per litre)

(cent per litre)

c) Retail diesel price in the last week of June

d) Retail diesel price in the third week of July

(cent per litre)

(cent per litre)

Sources: LSEG, European Commission and ECB calculations.
Notes: The retail price reflects the impacts of crude oil prices, refining costs and margins distribution costs and margins, excise duties and taxes in the euro area, derived from the European Commission’s Weekly Oil Bulletin (WOB). The percentage changes in pump prices shown in panels b), c), and d) are calculated relative to pump prices in the last week of February shown in panel a).
The latest observations are for the week of 23 February 2026 in panel a), the week of 6 April 2026 in panel b), the week of 29 June 2026 in panel c) and the week of 20 July 2026 in panel d).

Why refining margins mattered this time
What is behind the big jump in absolute prices for diesel and petrol? This time, refining margins made a difference.
These margins may vary for a number of reasons, including:
(i) the varying refining processes according to the refined product requirements and the type of crude oil used;
(ii) the varying supply of and demand for various refined products – for example, when refineries are closed for maintenance or damaged in conflicts, or also when refined products from specific countries are under embargo for political reasons.
In the case of the recent energy shock, the closure of the Strait of Hormuz has affected a significant share of global refining capacity. Essentially, this led to a decline in global refined-product exports of around 4.5 million barrels per day in the second quarter of 2026.[4] This sharp supply crunch resulted in rapidly widening refining costs and margins, jumping from a monthly average of €0.10 per litre of diesel in February to €0.26 in March (Chart 3, panel a).
More recently, the renewed escalation of the conflict has led to another surge in refining costs and margins to near-record highs amid reduced refining capacity, contributing €0.35 to the diesel price and €0.23 to petrol for the first three weeks of July (Chart 3).[5] Looking ahead, based on refined diesel futures on 20 July, the contribution from margins is expected to peak in August before declining to €0.16 by the end of 2027, close to levels observed at the end of February 2026.

Chart 3
Decomposition of fuel prices in the euro area

a) Diesel

b) Petrol

(cent per litre)

(cent per litre)

Sources: LSEG, European Commission and ECB staff calculations.
Notes: Chart shows monthly averages. Refining and distribution costs and margins are calculated as the difference between pre-tax consumer prices and crude oil prices. The latest observations are for the week of 20 July.

What happens on the “way down”?
Crude oil prices fell significantly during the recent short-lived reopening of the Strait of Hormuz (18 June to 11 July), and retail diesel prices followed suit (Chart 2, panel c). Over the last few decades the “rockets and feathers” literature has discussed whether there is any evidence of asymmetry – whether retail prices fall less quickly (“feathers”) when oil prices come down compared with how fast they rise when oil prices go up (“rockets”). Earlier studies for the euro area failed to find any asymmetries or the overall picture was inconclusive.[6] However, more recent work suggests that the pass-through could be slower on the way down.[7] This could reflect lags in inventory replacement, uncertainty about the persistence of crude oil price changes or weaker competitive pressure when costs decline. Further analysis is therefore needed to establish whether and why asymmetries were observed during the recent shock.
Conclusions
The Middle East oil price shock has been significant and had a marked impact on retail fuel prices, with refining margins amplifying the effect. Overall, the Harmonised Index of Consumer Prices (HICP) for fuel drove the increase in the HICP for energy from -3.1% to 10.8% between February and May 2026 before it declined to 8.5% in June. As observed in the past, increases in the prices of crude and refined fuels passed through to retail prices rapidly, while temporary reductions in excise duties and taxes helped to alleviate the burden on consumers. When oil prices fell during the brief reopening of the Strait of Hormuz, pressures on retail fuel prices eased to some extent. The renewed escalation of the conflict has led to another sharp rise in fuel prices reflecting not only higher crude oil prices but also surging refining margins.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

The authors are grateful to research assistance by Johannes Schäfer.

While the elasticity of retail prices to oil prices changes over time and depends on the various components’ levels, an elasticity of around 0.3 (a 1% increase in oil prices leading to a 0.3% increase in retail prices) is in line with a short-term forecasting model for energy (and transport fuels) inflation in the euro area (Bańbura, M., Bobeica, E., Giammaria, A., Porqueddu, M. and van Spronsen, J. (2025), “A new model to forecast energy inflation in the euro area”, Working Paper Series, ECB, No 3062).

See Meyler, A. (2022), “Developments in consumer liquid fuel prices”, in Kuik, F., Adolfsen, J., Lis, E. and Meyler, A., “Energy price developments in and out of the COVID-19 pandemic – from commodity prices to consumer prices”, Economic Bulletin, Issue 4, ECB.

See Oil Market Report – May 2026, International Energy Agency.

According to International Energy Agency’s Oil Market Report – July 2026, global refinery runs are down 6 mb/d year on year, with Middle East export refineries yet to restart, Russian throughputs curtailed by attacks and Asia still running at reduced rates.

See, for example, Meyler, A. (2009), “The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices”, Energy Economics, Vol. 31, Issue 6, November, pp. 867-881; Perdiguero-García, J. (2013), “Symmetric or asymmetric oil prices? A meta-analysis approach”, Energy Policy, Vol. 57, June, pp. 389-397.

For an analysis based on forecourt-level data for Germany, see, for example, Asane-Otoo, E. and Dannemann, B. (2022), “Rockets and Feathers Revisited: Asymmetric Retail Gasoline Pricing in the Era of Market Transparency”, The Energy Journal, Vol. 43, Issue 1, January. See also Cook, S. and Fosten, J. (2019), “Replicating rockets and feathers”, Energy Economics, Vol. 82, August, pp. 139-151; Wen, D., He, M., Wang, Y. and Zhang, Y. (2025), “Forecasting gasoline prices using oil prices: New evidence based on the rocket and feather hypothesis”, Energy, Vol. 335, 30 October.

 
 
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Year-on-year inflation in the OECD as measured by the Consumer Price Index declined to 4.2% in June 2026, down from 4.6% in May.
Year-on-year inflation in the OECD as measured by the Consumer Price Index (CPI) declined to 4.2% in June 2026, down from 4.6% in May (Table 1, Figures 1 and 2), following three consecutive monthly increases. Headline inflation declined in 20 OECD countries, rose in 6, and was stable or broadly stable in 12. In June, headline inflation was below or at 2.0% in nine OECD countries, and below 1.0% in three of them (Table 1).
Compared with May, energy inflation in the OECD fell by 4.0 percentage points (p.p.) in June, to 11.7% year-on-year, with declines in 24 of the 37 OECD countries with available data. Despite these declines, 10 countries recorded rising energy inflation, and 6 countries had energy inflation above 15%. Both food and core inflation (inflation excluding food and energy) declined by 0.2 p.p. in June to 3.4% and 3.6%, respectively.
In the G7, year-on-year headline inflation also decreased to 3.0% in June, down from 3.5% in May. The decline primarily reflected a 5.2 p.p. fall in energy inflation. Notably, headline inflation declined in every G7 country except Japan, where it edged up by 0.2 p.p. to 1.7%, mirroring a rise in energy inflation from below to close to zero. By contrast, a marked decrease in energy inflation in the United States drove headline inflation to 3.5% in June, down from 4.2% in May. Similar developments were also observed in France, where the greater number of days of seasonal sales in June 2026 than in June 2025 accentuated the decline (Figures 2 and 4). In Germany, the United Kingdom, and the United States, core inflation was the main driver of headline inflation. In contrast, in Canada, France, and Italy, the combined effect of food and energy prices was primarily responsible for headline inflation. In Japan, the contribution of core inflation was roughly equal to those of food and energy combined (Figure 3).
In the euro area, year-on-year headline inflation as measured by the Harmonised Index of Consumer Prices (HICP) fell to 2.8% in June, down from 3.2% in May, as energy inflation fell and food inflation reached its lowest level in five years. Eurostat’s flash estimate indicates that euro area year-on-year headline inflation remained broadly stable at 2.9% in July 2026. Energy inflation is estimated to have increased to 10.0% and core inflation to have remained broadly stable at 2.5%.
In the G20, year-on-year headline inflation fell to 4.1% in June, down from 4.3% in May. Headline inflation in China declined to 1.0%, from 1.2% in May, while it rose in Argentina, Indonesia and South Africa. It was stable or broadly stable in Brazil, India and Saudi Arabia (Table 2).
Click here to access figures.
 
 

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The post OECD | Headline Inflation Eased to 4.2% in June 2026, Reflecting a Temporary Decline in Energy Inflation first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

On 2 August 2026, new rules on the transparency of AI systems take effect.
AI is advancing quickly, making it increasingly difficult to distinguish AI-generated and manipulated content from human-created and authentic content. This creates new risks of misinformation and manipulation at scale, fraud, impersonation, and consumer deception.
The new transparency obligations will help people recognise when they are interacting with AI or are exposed to AI-generated content, so they can make informed decisions and better protect themselves from misinformation or deception.
Click here to access explanatory video.
Transparency obligations for providers and deployers of certain AI systems

Marking and labelling of AI-generated content: certain AI-generated or manipulated content must be clearly and visibly labelled and include machine-readable marks. The EU has created a set of icons that can be used for this purpose. This applies to

images, audio, and video content that resemble existing persons, objects, places, entities, or events (deepfakes)
emotion recognition and biometric categorisation tools
text published to inform the public on matters of public interest where there has been no human review or editorial control.

Transparency when interacting with an AI system: Users must be clearly informed when they are not interacting with a real person, but an AI system, for example a chatbot, AI agent, and avatar.

The Commission has published guidelines to assist providers and deployers of AI systems in meeting these transparency obligations. The guidelines explain how compliance can be demonstrated, including through adherence to a code of practice.
Enforcement of the rules and sanctions
National market surveillance authorities, the European AI Office (for systems under its supervision), and the European Data Protection Supervisor (when EU institutions are providers or deployers) are responsible for enforcing the transparency rules and may issue fines

up to €15 million, or 3% of global annual turnover, for companies
up to €750k for EU institutions, bodies, and agencies
with proportionality taken into account for small and medium-sized enterprises (SMEs) and small mid-cap companies (SMCs)

The AI Act entered into force on 1 August 2024. Its provisions apply in stages, with different obligations taking effect at different times. The Act creates a single market and harmonised rules for trustworthy AI in the EU and promotes AI innovation and uptake. It also addresses potential risks to people’s health, safety, and fundamental rights, while safeguarding democracy and the rule of law. Ensuring its effective implementation is now a key priority for the Commission.
 
 
 
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WASHINGTON, D.C. — The U.S. Department of Commerce today highlighted an inaugural successful collaboration with U.S. Customs and Border Protection to combat duty evasion under the Enforce and Protect Act (EAPA). For the first time, in August 2025, the Department of Commerce submitted a duty evasion allegation to U.S. Customs and Border Protection under EAPA. On July 30, 2026, U.S. Customs and Border Protection (CBP) determined that antidumping duties are being evaded on imports of carbon and alloy steel threaded rod from India (EAPA Case 8210).
This investigation is a significant milestone for the Trump Administration in its collaborative efforts to combat fraud and evasion of antidumping and countervailing duty orders. Commerce discovered the underlying evasion of the antidumping duty (AD) order on carbon and alloy steel threaded rod from India (A-533-887) and worked with CBP to identify millions of uncollected duties to be recovered.
The investigation targeted 14 importers which were found to be evading existing antidumping measures by claiming they were eligible for a zero percent all-others rate instead of paying the duty rate assigned to their producer or exporter. As a result of the investigation, CBP has taken steps to ensure these importers pay the full duty rates on entries of merchandise subject to the AD order on Indian-origin carbon and alloy steel threaded rod from India.
“We applaud CBP’s finding in this investigation initiated on Commerce’s intelligence that foreign companies are evading payment of antidumping duties,” said Christopher Abbott, Acting Assistant Secretary of Enforcement and Compliance at the Department of Commerce. “We will continue to work with our interagency partners to take immediate action against duty evaders in order to provide a level playing field for American manufacturing.”
Antidumping and countervailing duty laws are critical tools designed to level the playing field for American businesses and workers. These laws counteract unfair pricing practices by foreign companies selling goods below fair market value in the United States and address foreign government subsidies that distort competition. EAPA empowers CBP to investigate and combat schemes that evade the payment of these vital duties and to hold violators accountable. Commerce determines whether dumping or unfair subsidies have occurred and sets the duty rates, while CBP is responsible for enforcing these duties at the border and investigating evasion. This close collaboration between Commerce and CBP is essential to effectively uphold these laws.
CBP has an e-Allegations portal where the public can report to CBP any suspected violations of trade laws or regulations related to imported goods. Any Federal Agency can also use this portal to report customs violations, and to request EAPA investigations.
 
 
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This edition of the Global Trade Update examines the strong but increasingly uneven expansion of international trade in the first half of 2026.
Global goods trade is estimated to have reached approximately US$13.7 trillion in the first half of 2026, up 12.5 % from the same period in 2025. Services trade grew by 10.5 %. Together, goods and services added around US$2 trillion to global trade, putting it on course for a record annual value.
Higher prices inflate trade growth
A significant share of the increase reflects higher prices rather than stronger trade volumes. Disruptions to shipping through the Strait of Hormuz, together with concerns over energy supplies, raised energy, transport, logistics and production costs.
Prices of traded goods increased by about 3.6 % in the first quarter and is estimated to have risen by about 5 % in the second, largely reflecting higher energy and selected commodity prices.
East Asia leads an uneven expansion
East Asia was the main engine of global trade growth in the first quarter of 2026, supported by strong import and export performance in China and the Republic of Korea. Trade in other Asian subregions contracted , while Africa and the Americas experienced stronger import than export growth.
East Asia’s role was also central to South-South trade: excluding the region, trade among developing economies contracted during the first quarter. Trade balances continued to shift, with China’s surplus widening and the United States’ deficit narrowing.
AI and electric mobility support sectoral growth
During the first quarter of 2026, demand for AI infrastructure, digital technologies and electric mobility drove strong growth in technology-intensive goods. Trade increased by 38 % for critical minerals, 25 % for semiconductors, 15 % for batteries, 14 % for ICT products, and 11 % for electric vehicles.
By contrast, trade contracted in chemicals, iron and steel, and some renewable-energy products. Fossil-fuel trade increased largely because of higher prices.
Click here to access the full report.
 
 
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Blog | Energy prices are surging again, pushing up inflation in the euro area. This ECB Blog post examines whether firms are attributing this to a demand surge or to supply constraints. Two approaches – textual analysis and empirical models – can help make the picture clearer.
For central banks, whether inflation stems from demand or supply makes a crucial difference. Demand-driven inflation (sometimes called demand-pull inflation) calls for a firm policy response. Meanwhile, supply-driven inflation (also known as cost-push inflation) warrants a more careful assessment. This second kind is often caused by developments that are largely outside a central bank’s control – something to be weathered rather than fought. Telling the two types of inflation apart in real time is one of the hardest challenges in monetary policy.
The war in the Middle East has brought this challenge back to the fore. Between February and June 2026, the surge in crude oil prices triggered by the conflict led to a sharp upswing in energy inflation, pushing euro area headline inflation up from 1.9% to 2.8% year on year (Chart 1, panel a). These developments are reminiscent of the events following Russia’s invasion of Ukraine in February 2022 (panel b). Now as then, the inflation surge appears to be largely driven by an energy supply shock. However, when designing the monetary policy response, the nature of the shock itself is only one part of the story. The balance between demand and supply pressures at the moment the shock hits also matters, as does the breadth, size and persistence of the shock. And here too, supply and demand factors both come into play.[1]
To answer this question, we draw on two complementary approaches. First, we look at what financial actors are saying about inflation, based on a textual analysis of corporate earnings calls and articles in the financial press. Second, we use two empirical models to examine what firms are telling business surveys about their expectations. Crucially, both approaches are based on timely, forward-looking indicators. That makes these tools particularly well suited to real-time assessment, especially in the absence of timely hard data.
Indeed, at the time of publication, we are not aware of any analyses based on hard data for the euro area that compare the nature of the recent inflation surge to that of the 2022 episode.[2]

Chart 1
Oil prices and HICP inflation in 2026 and 2022

(left-hand scale: USD/barrel; year-on-year change, percentage)

Sources: Energy Information Administration, Eurostat, European Commission and ECB staff calculations.
Notes: The vertical lines separate the periods before the outbreak of the war in the Middle East at the end of February 2026 (left) and in Ukraine at the end of February 2022 (right) from the periods that followed. The latest observations are for June 2026.

What companies and newspapers are saying
A first clue comes from earnings calls, the quarterly conference calls in which listed firms discuss their results and outlook with investors. By scanning these calls for mentions of both inflation and inflation risks, we can track how much attention firms are paying to price pressures and the risks they pose to their operations in near real time. In May 2026, firms’ focus on inflation and inflation risks had intensified since the start of the Middle East conflict. However, the levels and degrees of variation remained below those observed in March 2022, when Russia’s invasion of Ukraine sent energy prices spiralling (Chart 2, panel a).
A second indicator of what drives inflation comes from the financial press. Using a text analysis algorithm – specifically, a causality extraction method – we can identify and classify the causes of inflation reported in newspaper articles.[3] The algorithm first extracts the causes of inflation described from sentences that mention inflation together with explicit causal language. It then assigns these to either demand or supply narratives.[4] Demand narratives tend to cite factors such as strong consumer spending, fiscal deficits or monetary stimulus. Supply narratives tend to reference energy prices, supply chain disruptions or input costs.
The results are striking. Compared with 2022, since the start of the war in the Middle East demand-side narratives – stories about consumer spending and monetary stimulus – have played a smaller role than supply narratives – stories about energy costs and supply chain disruptions (Chart 2, panel b). More specifically, this time round the financial press has largely attributed inflation to energy cost-related supply narratives. In contrast, there was a broader mix of narratives back in 2022, with greater prominence given to supply chain disruptions. This is an important initial signal, pointing to comparatively clearer cost-push (rather than demand-pull) inflation in the current episode.

Chart 2
Firms’ attention to inflation and inflation risks and news-based narratives in 2026 and 2022

a) Firms’ attention to inflation and inflation risks
(cross-sectional average of sentences mentioning inflation keywords, three-month moving average)

b) Demand and supply narratives
(volume of Financial Times articles, period average)

Sources: NL Analytics, Financial Times and ECB calculations.
Notes: In panel a), the vertical lines separate the periods before and after and the outbreak of the war in the Middle East at the end of February 2026 (i) and Russia’s invasion of Ukraine at the end of February 2022 (ii). Firms’ attention to inflation is the three-month moving average of the cross-sectional average number of NL Analytics earnings-call sentences mentioning inflation keywords. Firms’ attention to inflation risk is the three-month moving average of the cross-sectional average number of NL Analytics earnings-call sentences mentioning inflation keywords as well as risk or uncertainty-related language. The inflation keywords come from Song and Stern (2025). Risk and uncertainty-related language comes from Hassan et al. (2019). In panel b), the figures are derived from averages of the months considered. Demand and supply narratives are derived from Financial Times inflation articles using the causality extraction method in Trebbi (2025). The latest observations are for June 2026.

What business surveys reveal
For a precise assessment of the drivers of firms’ price expectations, we turn to the European Commission’s business surveys, which poll companies in the manufacturing, services and construction sector. Once a month, these surveys gather feedback about firms’ three-month-ahead expectations for prices and activity.[5] Once a quarter, firms are also asked about any specific obstacles limiting their production – e.g. insufficient demand, financial constraints, materials shortages or labour constraints.
We then combine these responses into composite indices – weighted averages across sectors – and use two structural models to interpret their movements. A monthly model identifies two types of shock: demand shocks move activity and price expectations in the same direction, whereas supply shocks pull them in opposite directions. For instance, when inflation is driven by expansionary demand, firms expect both economic activity and prices to rise. Conversely, when adverse supply conditions push prices up, they expect economic activity to decline. A more granular quarterly model can then help us to further tease out factor-specific drivers: three shocks on the demand side (product demand, financial conditions and other demand) and three on the supply side (materials supply, labour conditions and other supply).[6]
So what do we find?
The composite index of business price expectations rose markedly after the outbreak of the war in the Middle East, and has remained above its pre-war level ever since. Structural decompositions can help explain why (Chart 3). Amid broadly stable demand-pull pressures, cost-push shocks drove up price expectations at the start of the war (panel a). At granular level, these shocks mainly reflected materials supply shortages – linked to higher energy prices – and were concentrated in manufacturing – particularly in energy-intensive subsectors such as chemicals, refined petroleum and paper products (panel b).
As these findings reveal, today’s picture is quite different from the one in 2022. After Russia’s invasion of Ukraine, business price expectations stood significantly above their current level – by about two standard deviations. The higher level in 2022 reflected stronger broad-based inflationary pressures, as demand was buoyant – driven by the post-pandemic reopening, especially in services – while supply was constrained – with global bottlenecks still biting, most notably in manufacturing. Also, the composition of demand and supply shocks was different back in 2022. Demand-pull pressures dominated in 2022, whereas cost-push inflationary forces have played a comparatively larger role in the current episode.

Chart 3
Drivers of business price expectations in 2026 and 2022

a) Demand-supply decomposition of monthly composite business price expectations
(standardised balances)

b) Granular decomposition of quarterly business price expectations in the two episodes
(one-quarter changes in standardised balances)

Sources: European Commission and ECB staff calculations.
Notes: In panel a), the vertical lines separate the periods before and after Russia’s invasion of Ukraine at the end of February 2022 (i) and the outbreak of the war in the Middle East at the end of February 2026 (ii). The decomposition is estimated using a Bayesian structural vector autoregression model on monthly data for composite business expectations for activity and prices. In panel b), the decomposition is estimated using a Bayesian structural vector autoregression model on quarterly data for composite business expectations for activity and prices, as well as factors limiting production (insufficient demand, financial constraints, shortage of materials and equipment, shortage of labour force, other limits). In both panels, “residual” refers to the sum of a constant and an unexplained shock. Composite business price expectations refer to the gross value added-weighted average of three-month-ahead selling price expectations for manufacturing (22%), services (71%) and construction (7%). For further details on the estimation, see Battistini and Neves (2026). The latest observations are for June 2026 in panel a) and for the second quarter of 2026 in panel b).

What all this means for monetary policy
Taken together, the two approaches tell a consistent story. Unlike the 2022 episode, the current rise in inflation has been driven, first and foremost, by a supply shock. It has been fuelled by rising energy prices passing through the production chain, rather than by a broad-based surge in demand. Firms understand this. They have paid increasing attention to inflation and inflation risks, and their demand expectations have remained flat. The press understands this too. Supply narratives about energy prices have dominated media coverage.
For the ECB, these findings matter. A supply-driven inflation episode does not automatically call for the same forceful tightening that demand-pull inflation would warrant. However, supply shocks can become entrenched if they feed more broadly into wages or inflation expectations and add to demand pressures. Monitoring the drivers of inflation based on firms’ expectations – ahead of any official hard data – can be useful for calibrating policy appropriately in real time.
The two frameworks presented here offer just such a forward-looking perspective. Combined, they provide an early-warning system – grounded in what newspapers report, as well as in what firms say and expect – that can help central banks stay ahead of rapidly shifting economic conditions.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

See Arce, Ó., Battistini, N., Bouabdallah, O., Lis, E. and Mohr, M. (2026), “A tale of two energy crises – initial conditions matter”, The ECB Blog, 3 June; andArce, Ó. and Sondermann, D. (2026), “Low unemployment, plenty of labour: what does it imply for wage pressures”, The ECB Blog, 9 March.

See, e.g., Nickel, C. et al. (2025), “A strategic view on the economic and inflation environment in the euro area”, Occasional Paper Series, No 371, ECB.

For further details, see Trebbi, G. (2025), “Inflation narratives and expectations”, Working Paper Series, No 3158, ECB.

The initial unit of analysis is at the article level. An article is classified as a demand or supply article based on the type of narrative most frequently mentioned. Mixed cases typically result in an article not being classified as either.

Due to the specific phrasing of the questions asked to firms in different sectors, “activity” refers to production for manufacturing, demand for services and employment for construction.

“Other demand” and “other supply” shocks capture a broad range of disturbances, mainly related to uncertainty on the demand side and supply chain disruptions and regulations on the supply side. These shocks played a notable role in the fluctuations in activity and price expectations at the height of the COVID-19 pandemic. For further details, see Battistini, N. and Neves, P. (2026), “What drives business expectations? A tale of demand and supply”, Working Paper Series, No 3179, ECB.

 
 
Compliments of the European Central BankThe post ECB | Demand or Supply-Driven? How Firms View Inflation Right Now first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Good evening,
It’s always great to be back in America and to be here among friends: friends of Europe, friends of defence. Friends of football.
The World Cup is over. And tonight we have the next big event in America: EU Defence Night!
It’s humbling to speak to you from the same stage as many world leaders: Konrad Adenauer, Henry Kissinger and George H. W. Bush. And Margaret Thatcher, Vaclav Havel.
When Bill Clinton spoke here, he spoke here for more than an hour. I will try my best to be a little bit shorter.
It’s great to be here at Georgetown University, one of the most famous and oldest universities in America.
Founded around the time America was born as a country. In 1789, the year George Washington was elected President.
Vilnius university, in my hometown, where I studied and did research in physics – was founded a little bit earlier. Around the time the first European settlers arrived in America, in 1579. Georgetown University started as a Jesuit university. Vilnius University also started out as a Jesuit academy. Maybe this is why I feel immediately at home, here at Georgetown University.
These historical surroundings inspire me to speak about the big historical changes we are living through, which will impact the Future of American Strategy, as it was discussed recently in a very interesting collection of essays by the Council of Foreign Relations. And which will impact the Future of European Strategy, which I want to discuss this evening.
It’s worth to remember, that at the beginning of this century the five biggest economies in the world were the United States, Japan, Germany, United Kingdom, and France. The United States number one. Today there is only one European country in that list: Germany.
In 50 years from now, by 2075, as a forecast by Goldman Sachs shows, the five biggest national economies will be China, India, the United States, Indonesia, Nigeria. No individual European countries at all. United States on number three.
The global balance of power is shifting. China and India are returning to global economic leadership, as they were before Columbus sailed to the “New World”.
For the USA it can be sensitive to go in the next 50 years from global economic leadership down to third place.
Of course, for us in Europe this is not a new experience. Two world wars, Soviet occupation and the Cold War changed our place in the world. We lost our global economic leadership at that time.
Our answer then was: to join forces. To join forces in the European Union. To put the destructive wars of the past behind us. Based on shared values, to work for freedom and prosperity.
And now after 70 years of European Unity, together, in the European Union, we have a GDP of around 23 trillion dollars.
And together, we are still in the top five. Together we are the second economy in the world. Second only after the United States.
Unity has made us much stronger.
Of course, at the end of the century collectively we shall be only Nr.4. But for us to drop down from Nr.2 to Nr.4 can be less painful. Since our history and your history gives us a lot of evidence, that unity makes us stronger, our answer today, in this changing world, must also be – to join forces across the Atlantic, with our historical partner – the United States. Our most natural ally.
One year after concluding our agreement on tariffs and trade it is worth repeating: the USA is the first economy in the world. The European Union is second economy in the world. As combined economies, even at the end of the century, we shall be able to keep global economic leadership. Perhaps.
Together we need to fear no adversary. But alone and divided, we are in danger.
The biggest adversary, the biggest threat on the continent of Europe is now Russia. We can only deter Russian aggression, together. Russia is spending 50% of its national budget on its war machine. Russia is outproducing Europe in many areas and even the United States and NATO. And will be capable of launching 10 millions drones next year.
The NATO Summit in Ankara made clear: Russia is the biggest long term threat for Europe and for NATO. To deter Russia we need a stronger Europe, for a stronger NATO. We need NATO 3.0.
Americans are asking Europe to take primary responsibility for its own conventional defence. Because the USA needs to shift to the Indo-Pacific. And this is what we are doing – we are taking responsibility. Eight European countries are already spending more than the United States on defence, in percentage of GDP. The Baltics and Poland now are spending more than 5% of their GDP on core defence. The United States with 3.2% is in the 9th place.
And if trends continue, by 2030 European countries in nominal terms, dollar by dollar, euro by euro will be spending more than the United States on defence: one trillion dollars. Europe is catching up.
A true defence big bang, making both Europe and NATO stronger.
We are now concretely discussing with our American partners the way forward. An orderly discussion on changing responsibilities.
What capabilities does America need to shift from Europe to other parts of the world? From where, and when?
Together we are identifying gaps. And the European Union can then support Member States to fill those gaps.
We need to remember that we are living through a century of major tectonic geopolitical shifts in the world.
Some of these are shifts in history that happen only once in 500 hundred years – like China and India returning to global economic leadership.
Other shifts – once in hundred years: like the dual transformation from transatlantic collective defence of Europe to much more European collective defence of Europe.
And at the same time – from the expeditionary doctrine, approved by NATO in 2012, back to the doctrine of territorial defence of Europe.
These tectonic geopolitical shifts demand from us a holistic approach to our defence readiness, which has three equally important pillars:
a)material defence readiness – weapons, finances, industry, production and procurement;
b)Institutional defence readiness – how we are organizing ourselves in Europe; how we are creating a European pillar of NATO;
c)and political defence readiness – how we are upholding our political unity, despite all the hybrid attempts to destroy it.
Today I will concentrate mainly on material defence readiness, but we shall not achieve full defence readiness  without all other pillars.
Our European material defence ramp up depends on three things.
First, on the European Union. Defence in Europe is the primary responsibility of Member States and NATO, but our European defence big bang is impossible without the European Union. The European Union offers EU added value, allowing Member States to operate on a European scale.
So even the smallest Member States can leverage the power of an entire continent of 450 million people. For example: our EU Space for Defence programme. Which no Member State can build alone. But gives all Member States world class satellite navigation, observation with intelligence data, and soon secure connectivity.
We are now mobilising this EU added value in different areas of our defence. For example, since 2023 we ramped up ammunition production in Europe to two million rounds a year – only possible thanks to an EU policy instrument – called ASAP. Without that we would still be producing only 200,000 rounds a year.
Also, we relaxed EU budgetary rules so Member States can spend more on defence. It would otherwise not be possible for many Member States to reach agreed NATO 3.5 % defence spending targets.
We are encouraging cooperation, joint production and joint procurement. With new EU instruments and money.
We are pushing for the creation of one integrated European defence market, because now we have 27 markets. And this is a big obstacle to ramp up production.
At the same time we have dramatically cut “red tape” for defence industry across the entire European Union. From four years waiting times in some cases for permits to build defence production facilities – down to 60 days. In other words: from 1460 days to 60 days. 25 times faster.
Now, we are also radically destroying obstacles to military mobility across the continent. So troops and equipment – also American ones – can quickly go where they are needed.
In short, we are mobilising our EU added value to create a strong European Pillar of a NATO 3.0. To make NATO and the Transatlantic alliance stronger.
Second, our defence ramp up depends on partnership between European defence industry and American industry.
Until  2035, during the next 10 years, Member States will spend 7 trillion euro on defence. And they can spend their national money when they like and where they like.
This creates for US defence companies a rapidly growing European defence market.
On top of that are EU defence investment programmes, which also offer opportunities for American industry.150 billion in SAFE loans, the 60 billion Ukraine defence loan.
Also the next EU multi-annual budget, from 2028 till 2035 – around 130 billion euro for defence and space.
EU defence funds, compared to Member States money for defence, are around 100 times smaller, and are as you say in America: “small potatoes”. Not trillions but only billions. Nevertheless good opportunities.
Now almost 90 US companies are taking part in our European defence programmes. There is still a lot of space, for America to invest in European defence industry.
But while Europeans buy 40% of their defence equipment in the United States, the US buys only 1 % in Europe.
For a true transatlantic defence industrial partnership we need also American industry and militaries to procure and to invest in Europe. True partnership in defence is much more than just licensing or co-production: it’s also sharing IP rights, joint research and joint development of new products, joint innovations and joint learning from Ukrainian defence industrial experience.
What is damaging possibilities of American defence industry on the European continent?
It is still ITAR.
European Member States are very cautious to buy defence products without guarantees they will be free to use them as they need. And some clever companies are already advertising: our products are ITAR free.
That is a key selling point for your competitors.
Finally, for our defence ramp-up we need to learn from Ukraine. Russia is continuing its war of aggression. But at growing cost. Ukrainian drones are stopping the Russian advance. Disrupting logistics behind the front line. And deep inland they are striking the oil supply that fuels Russia’s war machine.
For the first time since the fall of communism: long queues in Moscow, queues before petrol stations. Occupied Crimea is collapsing.
But the more Ukraine is prevailing, the more desperate Putin gets. And deadly. Every day there are drone attacks and ballistic missile attacks on Kyiv.
We now need to double down on our support for brave Ukraine.
It’s good that President Trump discussed the possibility of licensed production of anti-ballistic Pac3 missiles in Ukraine.
It was good also that at the NATO Summit in Ankara allies once again promised: 140 billion euro in support for defence of Ukraine for this year and next year.
The European Union and Member States will continue our support. As we have done till now, being the biggest supporter worldwide of Ukraine, with more than 180 billion euro since the Russian invasion.
Member States can now use 150 billion euro in SAFE loans to procure with Ukraine and for Ukraine. And now money from our 60 billion Ukraine Support loan, devoted for defence of Ukraine, is starting to reach Ukraine.
But now Ukraine not only receives support, but also gives support. Including for us, in Europe.
Secretary of State Marco Rubio said: Ukraine has the best army in Europe.
Ukraine has the best army not only because it has the best generals and bravest soldiers. But also because Ukraine has the best and most innovative industry and engineers.
And why is the Ukrainian defence industry the most innovative?
At the very beginning of the war, there was no military demand from traditional generals of Ukraine for drones and for innovative defence.
Only after some time, in Ukraine, innovative defence supply from a dynamic industry managed to transform military demand.
Thanks to innovative supply – Ukraine changed its war doctrine. Thanks to transformation of its war doctrine, Ukraine now is prevailing.
In Europe we need to repeat the same road of transformation: on supply side and on demand side. And finally to transform our defence doctrines.
It would be difficult to understand if we in Europe would not take it as our vital interest to integrate the best European military force and most innovative defence industry  of Ukraine into our European defence architecture.
Ukrainian industry produces “good enough” weapons for wartime conditions, to perform on the battlefield. European defence industry produces “haute couture” defence products. Products made for peacetime conditions. Products that are technologically advanced, but difficult to make, expensive and hard to scale up.
We must learn from Ukraine how to make “good enough” defence products. “Good enough” weapons that get the job done. And are cheaper. Weapons that can have rapid scale-up of production, rapid innovation, rapid repairs.
We are learning how to transform our industry and war doctrine from Ukraine. By putting Ukraine at the centre of our defence initiatives. Our initiatives on defence innovation, joint procurement and production.
And Ukraine is part of pan-European Defence projects like the Eastern Flank Watch, Air Defence Shield and the European Sky Shield against ballistic missiles.
Last week we signed the EU – Ukraine defence industrial pact. And the drone alliance between EU and Ukrainian industry was established to jointly produce drones and counter drones systems. And plans to build joint anti-ballistic system, based on Ukraine produced missiles and European seekers and radars were announced.
We are bringing together Europe’s industrial power and Ukraine’s innovation power.
In a changing world, Europe and America need each other. In the short run – to face the Russian threat. In the longer run – to face the shifting balance of power on a global scene.
We are natural allies.
When we Europeans look at America, we see ourselves, descendents of Europeans who built America, including many Lithuanians. Men like Charles Dennis Buchinsk, who came to this country very young, spoke at first only Lithuanian and Russian and served in World War Two in the US Air Force. We know him better as Charles Bronson. I saw him on the screen when I was very young in movies like the Magnificent Seven and other Western movies. And he showed us the freedom and opportunities of America.
And in Europe and America we look at the world in very similar ways. We are rooted in the same historical and cultural, and religious and philosophical traditions.
We have the same motto: You “from many one” – “E pluribus unum”. And we have: “Unity in diversity”.
This summer, an American Hollywood blockbuster is breaking all records by telling one of Europe’s oldest stories: the Odyssey.
We share the same values of freedom and democracy. We share the historical experience of resisting and defeating totalitarianism of Nazi Germany and the Soviet Union.
Now it falls on our generation to be put to the test. Now it is our responsibility, to meet the great challenge of our age.
To deter Russian aggression and prevent war. And to bring our transatlantic alliance through this turbulent century into the next century.
 
 
Compliments of the European Commission The post European Commission | Speech by Commissioner Kubilius at “EU Defense Night” first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.