WASHINGTON, D.C. – The U.S. Department of Commerce’s International Trade Administration (ITA) is proud to announce its 2024 achievements, highlighting key efforts to enhance the competitiveness of U.S. businesses and workers, strengthen supply chains, and drive innovation in international trade.
“2024 was yet another impressive year for U.S. competitiveness across international markets,” said Under Secretary for International Trade Marisa Lago. “From strengthening supply chains to sustaining U.S. leadership in technology and innovation, ITA continues to enhance U.S. economic security and promote inclusive prosperity for all Americans.”
Key highlights include:
Strengthening American Supply Chains to Advance U.S. Competitiveness
The Supply Chain Center developed innovative tools to assess and help mitigate supply chain risks across critical industries, with special focus on critical and emerging technologies such as AI data centers, quantum computing, and hydrogen. The Supply Chain Center worked across the U.S. Government and with industry, academia, labor, and civil society leaders to enhance supply chain resilience, improve disruption preparedness, and foster strategic policies on supply chains.
A. Launched First-of-Its-Kind Supply Chain Risk Assessment Tool

ITA introduced the pioneering supply chain risk assessment tool, SCALE, which evaluates structural risks across more than 400 industries that are central to the U.S. economy.

B. Hosted Inaugural Supply Chain Summit

ITA organized the first-ever Supply Chain Summit in September 2024 with the Council on Foreign Relations, bringing together over 200 in-person leaders and 3,500 online participants to explore proactive strategies for enhancing supply chain resilience.

C. Partnering with 13 Indo-Pacific Nations to Secure Supply Chains

ITA secured commitments under the Indo-Pacific Economic Framework for Prosperity (IPEF) Supply Chain Agreement to strengthen semiconductor, chemical, critical mineral, and healthcare supply chains.

The IPEF Supply Chain Council, chaired by the U.S. Commerce Department, advanced multilateral cooperation on logistics and analysis.

D. Charting an Innovative Approach to Tackling Critical Mineral Supply Chains

ITA conducted in-depth analyses of critical mineral supply chains to address vulnerabilities and enhance resilience in industries such as semiconductors and batteries.

Promoting Strong Trade Enforcement for U.S. Workers and Businesses
A. Record-Breaking Enforcement

ITA administered over 700 AD/CVD orders, each of which defends U.S. businesses and workers from unfair trade practices.

B. Groundbreaking Regulations

ITA finalized major new trade enforcement regulations, expanding the range of unfair trade practices that ITA is taking action against. These unfair practices span from transnational subsidies to weak labor, environmental, human rights and intellectual property protections.

C. State-of-the-Art Monitoring

ITA launched the Global Scrap Monitor to enhance supply chain transparency about steel and aluminum imports, building upon the best-in-class Steel Import Monitoring and Analysis and Aluminum Import Monitoring systems.

Strengthening Economic Cooperation with Indo-Pacific Nations

At the inaugural Clean Economy Investor Forum in June 2024, the 14 IPEF partner nations identified $23 billion in investment opportunities for sustainable infrastructure projects in the Indo-Pacific.

The IPEF partner nations continued to deliver benefits for businesses and workers through landmark agreements to strengthen supply chain resilience, catalyze investments in sustainable infrastructure and climate technologies, and promote fair and predictable business environments.

Modernizing Advocacy, Export and Investment Promotion Services
A. Developed New Tools to Support U.S. Exporters

ITA released updated digital tools and services, such as the Global Business Navigator, the Exporter Roadmap, new episodes of the Export Nation Podcast, and a Business Matchmaking Platform.

B. Served a Wide Array of U.S. Businesses

ITA assisted approximately 93,000 U.S. clients, over 80% of which were micro, small or medium-sized companies. Over 20% of these clients were women-owned businesses, minority-owned businesses, or businesses from rural communities.

ITA facilitated $109 billion in U.S. exports and $52 billion in inbound investment with a focus on priority sectors including semiconductors and clean energy — altogether supporting over 519,000 U.S. jobs.

2024’s foreign direct investment accounts for about 20% of all FDI that SelectUSA has facilitated since its establishment in 2011.

ITA helped U.S. exporters secure foreign procurements valued at over $72 billion, supporting an estimated 320,000 U.S. jobs.

ITA’s Foreign-Trade Zones program supported 550,000 jobs and facilitated $149 billion in exports, strengthening U.S. manufacturing and employment.

Strengthening Outbound Investment Security

ITA played a key role in establishing the Outbound Investment Security Program to respond to threats posed by countries of concern attempting to develop sensitive technologies. ITA led stakeholder outreach, including significant input from U.S. investors, to help formulate a targeted policy framework.

Surpassing Travel and Tourism Goals

ITA drove significant progress under the National Travel and Tourism Strategy in 2024, and as a result, the United States is projected to surpass the Strategy’s five-year visitation goal of 90 million international visitors annually a year early in 2026.

Looking Ahead: ITA will continue to empower U.S. businesses and workers to compete and succeed globally, while fostering innovation and ensuring a level playing field in international trade.
 
Compliments of the United States Department of CommerceThe post DoC | International Trade Administration Highlights 2024 Achievements to Strengthen U.S. Competitiveness and Economic Security first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Prepared by Pablo Anaya Longaric, Alessandro De Sanctis, Charlotte Grynberg, Vasileios Kostakis and Francesca Vinci
Published as part of the ECB Economic Bulletin, Issue 8/2024.
 
1 Introduction
The surge in energy prices following the unjustified Russian invasion of Ukraine exposed the EU to the largest energy shock since the 1970s. As a key input in virtually any production process, the sharp rise in energy prices not only contributed to a surge in inflation and a loss of purchasing power for households but also to a significant increase in input costs, with ripple effects across all economic sectors.
Shocks that increase the cost of energy can negatively influence economic dynamics not only in the short run but also in the medium to long run through the investment channel. In the short term, higher input costs put downward pressure on production.[1] This can also result in lower investment, with negative consequences for productivity growth in the long term.[2]
The economic literature has long identified the importance of investment for productivity. Corporate investment, especially in fixed capital and research and development (R&D), is at the heart of productivity growth, which is in turn directly linked to the ability of firms to compete in international markets.[3] Productivity improvements reduce the cost of production per unit of output, allowing firms to lower prices and/or increase profit margins. Productivity increases can also enhance export competitiveness, as more productive firms are better positioned to capture and expand their market share.[4]
Energy shocks can also dampen a country’s competitiveness through their negative impact on investment and productivity. Following a positive shock to energy costs, compressed profit margins (especially for energy-intensive firms), subdued economic activity, heightened uncertainty and, in some cases, tighter financing conditions may reduce investment by firms, paving the way for future competitiveness losses.[5] This may occur particularly when producers are unable to fully pass on the cost increases to consumers, for instance due to a high price elasticity of demand.[6]
However, energy shocks can also incentivise firms to invest in energy generation and energy-saving projects.[7] Recent surveys indicate that firms are adapting to the evolving energy landscape by reducing their dependence on traditional energy sources in order to shelter against future energy shocks and secure competitive advantages.[8] These efforts to reduce the energy bill can lead to an increase in green investment, which can mitigate the overall impact of energy shocks on total investment. However, despite their potential to mitigate future energy shocks (and to reduce future energy prices), green investments may also be adversely affected by the direct and indirect consequences of an increase in energy prices.[9]
This article explores how energy shocks influence investment by European firms, focusing on fixed capital and R&D expenditure. Empirical analysis shows that energy shocks can have a negative impact on corporate investment and thus, potentially, undermine European productivity growth and future competitiveness. The analysis also shows that financially constrained firms and firms in energy-intensive sectors are more affected by energy shocks and respond by cutting investment more than other firms.
From a policy perspective, both national and EU measures are needed to reduce the exposure of the EU to future energy shocks. Further integration of European energy markets and progress in the green transition would contribute to reducing energy prices and strengthening energy supply, making the EU less vulnerable to adverse energy price developments.
 
2 The European energy mix
The main energy sources used in production in the EU are electricity and natural gas, together with oil and petroleum products. Electricity and natural gas are key inputs, each making up around a third of the EU’s industrial energy mix. These are followed by “oil and petroleum products” and “renewables and biofuels” at 11% each (Chart 1, panel a).[10] The industrial energy mix has remained largely unchanged over the past 15 years. When considering the energy landscape in which industry operates, it is also relevant to consider how the consumed electricity is generated, as this has a significant impact on its price. While the share of renewables in the EU electricity generation mix is growing, natural gas and other fossil fuels still play an important role (Chart 1, panel b), indirectly increasing their importance in the energy supply of firms.

Chart 1
Energy sources in industrial processes and electricity generation in the EU

(percentages)

Source: Eurostat.
Notes: Annual frequency. Panel a) refers to final consumption in the industrial sector. Panel b) refers to gross electricity generation. Oil and petroleum products exclude the biofuel portion. The category “other” includes manufactured gases, non-renewable waste, oil shale and oil sands, and peat and peat products.

Due to the marginal pricing system, the price of electricity is closely linked to fossil fuels. Electricity prices in short-term markets are determined by the most expensive facility used to generate electricity at any given point in time. In the EU, gas-fired power plants are typically the most expensive way of generating electricity, followed by coal, lignite and nuclear power. Renewables are typically the cheapest, as their variable costs are close to zero. A consequence of this mechanism is that gas often acts as the price-setter even though it generates a relatively low share of the EU’s electricity. According to the European Commission, in 2022 gas-fired power plants generated 19% of the EU’s electricity but set the price 55% of the time.[11]
Wholesale energy prices in the EU began rising significantly in the second half of 2021. As the EU imports nearly all the oil and gas it consumes, it is strongly exposed to price fluctuations in global markets, which can be affected by geopolitical developments and production decisions outside of the EU. Wholesale oil and gas prices started to go up in the second half of 2021, in part because of the recovery in economic activity following the pandemic and in part due to constraints in the supply of oil and gas. This was exacerbated by the Russian invasion of Ukraine in 2022, which drove up gas and oil prices further.[12] High gas prices had, in turn, a knock-on effect on electricity prices due to the marginal pricing system.
The spike in wholesale prices had a strong impact on the price of energy for EU industry. Wholesale prices are not transmitted perfectly to retail prices, as the latter are also influenced by factors such as taxation, regulatory frameworks, infrastructure availability, the electricity generation mix and contract structures. From 2021 onwards, many public policy measures were also taken to cushion energy shocks. Nevertheless, Chart 2 shows that the increase in wholesale prices was strongly transmitted to the retail prices paid by EU firms for electricity, natural gas and diesel. This had a significant impact on their production costs, with the producer price index for energy (PPI energy) more than doubling between 2020 and 2022.

Chart 2
Retail energy prices for firms in the EU

(left-hand scale: EUR/kWh; right-hand scale: index: 2021 = 100)

Sources: Eurostat and European Commission Oil Bulletin.
Notes: Frequency is semi-annual. Prices include all taxes and levies. For electricity and gas prices, data refer to medium-sized industrial consumers (band IC for electricity and I3 for gas). Gas prices for Cyprus and Malta are not included because Eurostat does not report the relevant data. As there is no Eurostat indicator for oil prices for non-household consumers, diesel is shown as an example of an oil product commonly used by EU industry, applying a conversion factor of 10 kWh per litre.

These developments spurred an intense policy debate about the EU’s dependence on imported energy and on the implications for its competitiveness in the face of energy shocks.[13] The EU relies significantly on imported energy and is thus more exposed to energy shocks than other major economies, such as the United States.[14]
 
3 The impact of energy shocks on EU corporate investment
While quantifying the effects of energy shocks on investment decisions is challenging, owing to the multitude of transmission channels as well as data limitations, exploring historical patterns can provide useful insights. To pin down the effect of energy shocks on investment, this article employs balance sheet data on publicly listed firms from Standard & Poor’s Compustat for the period 1999-2022 and estimates the response of fixed capital and R&D investment using local projections.[15]
Energy shocks can originate from different energy sources, and correctly identifying them is a major challenge. The energy crisis of 2022 was triggered by the disruption of natural gas supplies in Europe, which led to an increase in fossil fuel and electricity prices. However, given the historical importance of oil shocks, these have attracted more attention from academic literature than gas shocks, resulting in only a few reliable and readily available measures for the latter.[16] Furthermore, oil accounts for a significant share of energy consumed by the EU industrial sector, and prices of other energy sources, such as gas, are influenced by oil prices. Oil shocks can therefore be a good proxy for energy shocks, albeit with some caveats.[17] One of the most recent methods for identifying and measuring oil shocks concerns oil supply news shocks.[18] These shocks capture shifts in expectations about future oil production and prices rather than immediate disruptions, making them particularly relevant for investment decisions.[19]
Oil supply news shocks increase energy prices and reduce aggregate investment. As shown in Chart 3, an oil supply news shock leads to a contemporaneous increase of 7% in oil prices and of 1% in PPI energy.[20] Moreover, total gross fixed capital formation (GFCF) declines immediately after the shock, reaching a trough of -1.5% after two years. Investment in intellectual property products (IPP), which includes R&D, also decreases by 1% two years after the shock.[21]

Chart 3
Impact of oil supply news shocks on aggregate variables

a) Impact on oil prices and PPI energy

b) Impact on GFCF and IPP

(x-axis: years; y-axis: percentage changes)

(x-axis: years; y-axis: percentage changes)

Sources: Eurostat and ECB calculations.
Notes: The panels illustrate local projection estimation results on macroeconomic aggregates. The data for all regressions span the period from the first quarter of 1999 to the third quarter of 2023. For oil prices, the regression specification follows: βεΔhYj,t+h=ah+βhSt+ΞhXt-1+εt+h. PPI energy (index), GFCF (real 2015 EUR) and IPP (real 2015 EUR) include panel data for EU28 countries and the specification follows βεΔhYj,t+h=ajh+βhSt+ΞhXj,t-1+εj,t+h, where Yj,t+h is the outcome variable of interest at horizon h for country j, and Xj,t-1 includes a set of macroeconomic controls, including the lagged dependent variable. The shock St is normalised such that it increases PPI energy by 1% on impact. The solid lines show the estimated impulse responses, while the shaded areas represent 90% confidence intervals based on Newey-West standard errors robust to serial correlation (for oil prices) or Driscoll-Kraay standard errors robust to serial correlation and cross-section dependence.

Consistent with the aggregate evidence, firm-level analysis based on publicly listed firms shows that oil supply news shocks exert downward pressure on investment.[22] As shown in panel a) of Chart 4, following an oil supply news shock that increases PPI energy by 1%, capital expenditure of publicly listed firms decreases by 2.9% on impact and 4.1% after one year.[23] R&D expenditure displays a smaller decline of around 0.85% both on impact and one year after the oil shock (Chart 4, panel b). Compared to the aggregate analysis, firm-level results show a larger impact of the shocks on capital expenditure and a similar impact on R&D expenditure. A possible explanation for this discrepancy lies in the sample coverage. In the Compustat sample analysed, R&D expenditure accounts for approximately 60% of aggregate R&D spending on average during the sample period. In contrast, the sample coverage for capital expenditure is only around 20%. This suggests that the firm-level R&D response is likely to be more aligned with the aggregate results than the capital expenditure response. However, the exact nature of the difference in terms of capital expenditure is not known beforehand, meaning that the response could be either larger or smaller than the aggregate result. Examining the sectoral coverage reveals that energy-intensive firms are represented more in the firm-level sample than in the aggregated data. Specifically, the capital expenditure of energy-intensive firms makes up about 40% of total capital expenditure in the Compustat sample, whereas it only accounts for 12% in the aggregate data.[24] To the extent that energy-intensive firms are more susceptible to energy shocks and hence reduce investment more than non-energy-intensive firms, the firm-level results are consistent with the aggregate findings. This is discussed in more detail in the next paragraph.

Chart 4
Impact of oil supply news shocks on firms’ fixed capital and R&D expenditure

a) Impact on fixed capital expenditure

b) Impact on R&D expenditure

(x-axis: years; y-axis: percentage changes)

(x-axis: years; y-axis: percentage changes)

Source: ECB calculations.
Notes: Data cover publicly listed firms from Standard and Poor’s Compustat Global incorporated in EU28 countries over the period 1999-2022. Financial and utilities sectors are excluded. The econometric specification closely follows Cloyne, J. et al., “Monetary Policy, Corporate Finance, and Investment”, Journal of the European Economic Association, Vol. 21, No 6, 2023, pp. 2586-2634, which uses state-dependent local projections (see Jordà, Ò. and Taylor, A.M., “Local Projections”, NBER Working Paper, No 32822, August 2024) to estimate the response of corporate investment to a monetary policy shock. We estimate the effects of oil supply news shocks (S) on long-difference percentage changes in firm-level capital and R&D expenditure (Y), accounting for firm characteristics that drive the overall effect: βεΔhYj,t+h=ajh+βhSt+ΞhXj,t-1+εj,t+h.
The state-dependent local projections extend over a horizon of three years after the oil shock, with firm-level fixed effects and standard errors clustered at the firm and time level following Driscoll-Kraay. Matrix X includes controls for the lagged real assets of the firm, its equity to debt ratio, its liquidity ratio (defined as liquid assets over total liabilities), profit margin, sales growth and the GDP growth of the country where it is located, along with the corresponding central bank policy rate. The shock St is normalised such that it increases PPI energy by 1% on impact.
The solid lines show the estimated impulse responses, while the shaded areas show the 90% confidence intervals.

The role played by energy intensity warrants consideration because energy-intensive industries (EIIs) are particularly vulnerable to energy shocks owing to their energy needs. EIIs include sectors such as chemicals, metals, cement and glass and account for about 45% of electricity, gas and oil used by EU industries, despite representing less than 4% of EU gross value added in 2021.[25] These provide key materials for industries such as construction, the automotive industry and electronics and are important suppliers to sectors driving the green and digital transitions.[26] As a result, these are pivotal both to the EU’s decarbonisation goals and to its open strategic autonomy. However, European EIIs are burdened with electricity prices that are significantly higher than in some other economies, such as the United States, resulting in a competitive disadvantage.[27]
Financial constraints also play an important role in the investment decisions of firms. Financing conditions have long been recognised in the academic literature as critical enablers of investment, significantly influencing firms’ capacity to respond to shocks.[28] Survey evidence further indicates that financial constraints frequently emerge as major barriers to investment, particularly during periods of economic uncertainty.[29] Measuring financing constraints is challenging, as there is no agreed definition, but balance sheet data can be used to construct relevant estimates. The literature indicates that firms with relatively high debt (defined as a leverage ratio higher than the sample median) that are also of young age can be considered financially constrained.[30] High leverage constrains financing because firms with significant debt can be considered riskier, which leads to higher borrowing costs and stricter financing terms, while being a young firm compounds this constraint, as younger firms may lack established credit histories, collateral and proven revenue streams, making lenders more cautious when lending to them and thus limiting the availability of affordable external financing.
The joint occurrence of high energy intensity and financing constraints can amplify the effects of energy shocks. Recent survey data suggest that firms that self-identify as financially constrained are more likely to consider increases in energy costs as an impediment to investment than their non-financially constrained counterparts.[31] Empirical analysis reveals that financially constrained firms in energy-intensive sectors consistently reduce investment more sharply than other firms after an oil shock. Chart 5 shows the effect on firms, grouped according to energy intensity and financial constraints, of an oil supply news shock that raises PPI energy by 1% on impact. The analysis reveals that all groups reduce investment, but being in an energy-intensive sector and being financially constrained amplifies the impact of the shock on both capital and R&D expenditure.[32]

Chart 5
Impact of oil supply news shocks on capital and R&D expenditure by firm characteristics (energy intensity and financing constraints)

(x-axis: years; y-axis: percentage changes)

Source: ECB calculations.
Notes: For the econometric specification, see the notes to Chart 4. For the purposes of this analysis, financially constrained firms are those that are less than 20 years old and have a leverage ratio higher than the yearly sample median, which implies that whether a firm is financially constrained or not changes over time. The median was chosen to maximise observations per group, but results are robust to the choice of different thresholds. Energy-intensive firms are firms in NACE 2 sectors defined as EIIs by the European Commission.
The solid lines show the estimated impulse responses, while the shaded areas show the 90% confidence intervals.

 
4 Conclusion
The evidence presented in this article suggests that energy shocks tend to decrease investment and innovation in Europe, especially for financially constrained firms in energy-intensive sectors. Publicly listed firms in the EU reduce investment in response to energy shocks (as proxied by oil shocks). Empirical analysis indicates that a 1% increase in energy prices driven by oil shocks leads to a significant decrease in fixed capital expenditure (-4.1% after one year), while R&D spending drops by almost 1%, showing a more muted impact. Moreover, firms that are financially constrained and energy-intensive experience sharper reductions in investment following an oil price increase.
These findings are in line with a broad body of literature documenting the negative macroeconomic effects of oil shocks and confirm the importance of reducing the EU’s vulnerability to such shocks. The EU is heavily reliant on imported energy, making it more exposed to energy shocks than other major economies. As energy shocks put downward pressure on investment, and to the extent that investment slowdowns can lead to a decline in productivity, the EU is at risk of gradually losing competitiveness. This may threaten not only current but also future prosperity.[33]
Policy measures at both national and European level should therefore aim to secure the energy supply of the EU, lower energy prices and mitigate the exposure of firms to future energy shocks. While national interventions are best suited to address country-specific issues, EU actions should be aimed at tackling shared problems and fostering cross-country collaboration. The Draghi and Letta reports contain several proposals to address these issues.[34] These include strengthening joint procurement of gas imports to increase the EU’s market power and expanding the use of long-term electricity contracts. The two reports also emphasise that accelerating and simplifying permitting processes, channelling EU funds, and promoting cross-border projects to boost renewable energy production would enhance energy security and reduce energy prices in the medium term. Moreover, the Draghi report suggests targeted support measures for EIIs to ensure they remain competitive while contributing to decarbonisation. Finally, advancing the capital markets union could help ease financing constraints for firms, enabling them to invest in improving their energy efficiency. Together, these measures would have the potential to strengthen the resilience of the EU to future shocks and increase its long-term competitiveness.

See Lardic, S. and Mignon, V., “The impact of oil prices on GDP in European countries: An empirical investigation based on asymmetric cointegration”, Energy Policy, Vol. 34(18), December 2006, pp. 3910-3915.
Evidence presented in the article entitled “The impact of recent shocks and ongoing structural changes on euro area productivity growth”, Economic Bulletin, Issue 2, ECB, 2024, also shows that higher energy prices can lead to a reduction in productivity owing to the reallocation of factors of production within firms away from energy.
See Romer, P.M., “Increasing Returns and Long-Run Growth”, Journal of Political Economy, Vol. 94, No 5, 1986, pp. 1002-1037; and Romer, P.M., “Endogenous Technological Change”, Journal of Political Economy, Vol. 98, No 5, Part 2, 1990, pp. S71-S102.
See Melitz, M.J., “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity”, Econometrica, Vol. 71, No 6, November 2003, pp. 1695-1725.
See Lee, K., Kang, W. and Ratti, R.A., “Oil Price Shocks, Firm Uncertainty, And Investment”, Macroeconomic Dynamics, Vol. 15, No S3, November 2011, pp. 416-436.
See Matzner, A. and Steininger, L., “Firms’ heterogeneous (and unintended) investment response to carbon price increases”, Working Paper Series, No 2958, ECB, July 2024.
See Hassler, J., Krusell, P. and Olovsson, C., “Directed Technical Change as a Response to Natural Resource Scarcity”, Journal of Political Economy, Vol. 129, No 11, November 2021, pp. 3039-3072.
See “EIB Investment Survey 2023 – European Union overview”, European Investment Bank, October 2023; and “EIB Investment Survey 2024 – European Union overview”, European Investment Bank, October 2024.
See Bijnens, G., Duprez, C. and Hutchinson, J., “Obstacles to the greening of energy-intensive industries”, The ECB Blog, ECB, 17 September 2024.
The oil and petroleum products most commonly used by industry are gas oil and diesel oil, while the renewables and biofuels most commonly used by industry are solid biofuels such as wood.
See Gasparella, A., Koolen, D. and Zucker, A., “The Merit Order and Price-Setting Dynamics in European Electricity Markets”, JRC134300, European Commission, 2023.
See the article entitled “Energy price developments in and out of the COVID-19 pandemic – from commodity prices to consumer prices”, Economic Bulletin, Issue 4, ECB, 2022; and the article entitled “Geopolitical risk and oil prices” , Economic Bulletin, Issue 8, ECB, 2023.
See Draghi, M., “The future of European competitiveness”, September 2024.
For example, in 2022 the EU was reliant on imports for 62.5% of its energy needs. Import dependency was particularly high for natural gas (97.6%) and oil and petroleum products (97.7%). In contrast, the United States was a net energy exporter. See “Energy statistics – an overview”, Eurostat, May 2024; and “U.S. energy facts explained”, US Energy Information Administration, July 2024.
Over the period, investment by Compustat firms was on average equivalent to approximately 20% of total gross fixed capital formation and 55% of R&D investment at the European level.
See Hamilton, J.D., “This is what happened to the oil price-macroeconomy relationship”, Journal of Monetary Economics, Vol. 38, No 2, October 1966, pp. 215-220; and Raduzzi, R. and Ribba, A., “The macroeconomics outcome of oil shocks in the small Eurozone economies”, The World Economy, Vol. 43, No 1, January 2020, pp. 191-211.
Until 2015 the oil and gas markets were strongly linked. While they have gradually been decoupling in Europe since 2015, as the degree of indexation of gas contracts to oil prices has decreased, several studies suggest that such decoupling is not structurally complete. See the article entitled “Energy price developments in and out of the COVID-19 pandemic – from commodity prices to consumer prices”, op. cit.; Szafranek, K. and Rubaszek, M., “Have European natural gas prices decoupled from crude oil prices? Evidence from TVP-VAR analysis”, Studies in Nonlinear Dynamics & Econometrics, Vol. 28, No 3, June 2024, pp. 507-530; and Zhang, D. and Ji, Q., “Further evidence on the debate of oil-gas price decoupling: A long memory approach”, Energy Policy, Vol. 113, February 2018, pp. 68-75.
See Känzig, D.R., “The Macroeconomic Effects of Oil Supply News: Evidence from OPEC Announcements”, American Economic Review, Vol. 111, No 4, April 2021, pp. 1092-1125. Känzig proposes a novel method for identifying and quantifying oil supply news shocks by exploiting the high-frequency variation in oil futures prices surrounding OPEC announcements.
Alternative ways to identify oil supply shocks range from using a narrative shock series to structured vector autoregressions (VARs) identified with sign restrictions. See, for instance, Caldara, D., Cavallo, M. and Iacoviello, M., “Oil price elasticities and oil price fluctuations”, Journal of Monetary Economics, Vol. 103(C), May 2019, pp. 1-20; and Kilian, L., “Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market”, American Economic Review, Vol. 99, No 3, June 2009, pp. 1053-1069. However, these measures lack the forward-looking dimension that characterises oil news shocks.
The shock is identified using instrumental variables within a VAR; hence it is identified up to sign and scale. To facilitate the interpretation of the results, in the article the oil supply news shock series is normalised to increase PPI energy by 1% on impact, which corresponds to a shock size of slightly above one standard deviation.
IPP pertains to investment in intangible assets, including R&D, software and databases, mineral exploration, and entertainment, literary and artistic originals.
The results are robust to the exclusion of the pandemic and the recent energy crisis, namely data after 2020.
Capital expenditure pertains to long-term fixed assets owned by companies and used to produce goods or provide services, including land, buildings, machinery, vehicles and equipment.
Not every country in the sample reports fixed capital expenditure at NACE 2 level, which is required to distinguish between energy-intensive and non-energy-intensive sectors. Therefore, the figure of 12% is calculated only on the sub-sample of countries for which this information is available, namely: Belgium, Bulgaria, Czech Republic, Denmark, Greece, Cyprus, Latvia, Hungary, Austria, Portugal, Romania, Slovakia, Finland, Sweden, Norway and the United Kingdom.
According to the European Commission’s Annual Single Market Report 2021, EIIs encompass several manufacturing sectors, including wood and wood products (excluding furniture), straw and plaiting materials, paper and paper products, coke and refined petroleum, chemicals and chemical products, rubber and plastic products, other non-metallic mineral products and basic metals.
For instance, every €100 of downstream private sector production contains on average €5 of inputs from chemicals, minerals and basic metals (see Draghi, M., op. cit.).
See Dashboard for energy prices in the EU and main trading partners 2023, European Commission. For example, between 2020 and mid-2022 the retail prices of electricity and natural gas (excluding recoverable taxes and levies) for EU firms were, on average, more than double the prices paid by their US counterparts. The retail price of diesel (including taxes) in the EU was slightly less than double the price in the United States.
For an overview, see Cloyne, J., Ferreira, C., Froemel, M. and Surico, P., “Monetary Policy, Corporate Finance, and Investment”, Journal of the European Economic Association, Vol. 21, No 6, December 2023, pp. 2586-2634.
See “EIB Investment Survey 2024 – European Union overview”, op. cit.
See, for example, Durante, E., Ferrando, A. and Vermeulen, P., “Monetary policy, investment and firm heterogeneity”, European Economic Review, Vol. 148, 104251, 2022; and Cloyne, J. et al., op. cit.
See “EIB Investment Survey 2023 – European Union overview”, op. cit.
The difference between the groups in panels a) and d) in Chart 5 is statistically significant on impact and after one year.
See Draghi, M., op. cit.
See Letta, E., “Much More Than a Market – Speed, Security, Solidarity: Empowering the Single Market to deliver a sustainable future and prosperity for all EU Citizens”, April 2024; and Draghi, M., op. cit.

 
Compliments of the European Central BankThe post ECB | Energy shocks, corporate investment and potential implications for future EU competitiveness first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

By Julie Cooper and Tim Youngberry | New Public Financial Management (NPFM) emerged in the 1980s as a transformative approach to public sector governance, aimed at enhancing efficiency, accountability, and responsiveness. Rooted in principles drawn from private sector management, NPFM promotes results-oriented practices such as performance-based budgeting, measurable outcomes, and decentralized management. Its objectives align closely with those of traditional PFM: ensuring fiscal discipline, strategically allocating resources, and delivering services efficiently and effectively.

However, while NPFM’s objectives are commendable and have often led to positive outcomes, its achievements are debatable, especially in developing countries. This is because the implementation process can be burdensome, particularly in environments where administrative capacity is still developing. Even in countries that are considered relatively well-developed, the sophistication of some of the concepts in NPFM can be lost on officials in line ministries who need to work within NPFM frameworks.  So, what might be sensible to technically proficient staff in the finance ministry can be difficult to understand for officials who are not ‘financially literate’ in line ministries.
What is good about NPFM?
NPFM adopts a more holistic approach to public finance reform, harnessing the capability and capacities across a broad range of areas including governance, performance management and workforce assessment and capability.  NPFM has delivered notable successes in various countries:

New Zealand: New Zealand achieved remarkable fiscal discipline and efficiency, with its government debt-to-GDP ratio falling from 52% in the 1980s to 32% by the late 1990s. Decentralized accountability and performance-based evaluations have supported sustainable results.

Sweden: Introduced multi-year budgeting and spending caps during the 1990s, reducing public debt from over 70% to around 40% of GDP by 2010. High-quality services in healthcare and education showcase the effectiveness of balancing fiscal discipline with service delivery.

Australia: Devolution of authority and accrual accounting in the 1980s and 1990s helped reduce public debt to near zero by the mid-2000s, while shifting to outcome-based performance assessment assisted in fostering innovation in service delivery.

But NPFM can be challenging …
Despite these successes, NPFM faces significant challenges, in particular:

Administrative Burden: Rigid procedures and concepts that are unfamiliar to public officials can overwhelm public sector institutions, particularly in countries with limited capacity. For example, performance-based budgeting demands robust data systems and trained personnel, which are oftentimes not readily available

Short-Term Focus: The desire to show ‘quick wins’ in NPFM reform can sometimes lead to less-than-optimal fiscal outcomes in the long-run. For example, the United Kingdom’s Private Finance Initiative reforms prioritized immediate cost-efficiency, but resulted in long-term financial commitments and fiscal inflexibility.

Capacity vs. Efficiency: Excessive emphasis on cost-cutting can undermine public sector capability as workforce numbers are reduced.  This affects the capacity of the workforce to implement NPFM as well as the quality of public services.  For example, in Greece austerity-driven reforms weakened public sector capacity and diminished essential services.

Stakeholder Resistance: Reforms perceived as top-down or overly focused on ‘technical’ matters often meet resistance from public officials who do not have the technical expertise to understand or implement the reforms.

How should the challenges be addressed?
The challenges associated with NPFM often stem from the technical nature of the reforms and overly complicated reform processes that fail to account for local contexts:

Maturity of Institutions: NPFM reforms require strong institutional frameworks, reliable data, and skilled personnel. In less mature systems, NPFM frameworks may have been overly ambitious and did not account for the capacity of the affected public institutions.

Procedural Complexity: Reforms emphasizing detailed compliance over clear, actionable outcomes can stifle innovation and responsiveness.

Capacity Constraints: A skilled workforce is key to NPFM. However, many ministries lack the resources to effectively manage complex reforms, leading to delays and diminished results.

A Path Forward: Simplifying NPFM for Better Outcomes
To ensure NPFM achieves its intended objectives, reforms should be grounded in simplicity, flexibility, and context-appropriate strategies:

Phased Implementation: Introduce reforms gradually, allowing institutions to build capacity and adapt. Focus on foundational elements like budgeting discipline and basic performance tracking before advancing to complex systems.

Context appropriate strategies: Adapt reforms to a country’s administrative maturity, ensuring that systems, policies and procedures – including IT software – are realistic and implementable.

Capacity Building: Invest in training, data systems, and institutional development to support the effective implementation of NPFM principles.

Stakeholder Engagement: Involve public employees, unions, and civil society in designing and monitoring reforms to foster buy-in and address local needs.

Balancing Goals: Ensure that NPFM objectives are balanced to ensure that one area, such as cost-efficiency, does not dominate. Have clear and simple metrics to track progress.

Do not replicate the private sector: NPFM draws lessons from the private sector in efficiency and effectiveness. But the private sector is different and should only be used as an example. Private sector practices should generally not be copied directly into the public sector.

Conclusion
NPFM represents a valuable framework for achieving transparency, accountability, and efficiency in the delivery of public sector goods and services. While its objectives remain valid, success depends on implementation strategies that avoid unnecessary complexity and account for local conditions. By focusing on simplicity, capacity building, and stakeholder engagement, governments can unlock the full potential of NPFM to deliver sustainable improvements in fiscal discipline, resource allocation, and public service delivery.

 
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Prepared by Alina Bobasu, Johannes Gareis and Grigor Stoevsky | Following a pandemic-related surge in 2020, the household saving rate in the euro area fell back to its pre-pandemic average by mid-2022 but has since risen again noticeably. The seasonally adjusted euro area household saving rate, as reported by Eurostat in the quarterly sector accounts, rose sharply after the outbreak of the COVID-19 pandemic.[1] This was mainly due to the lockdowns imposed to contain the spread of the virus, which dampened consumption, while government measures helped to support disposable incomes.[2] With the restrictions largely lifted by 2022, the saving rate returned to its pre-pandemic average (Chart A). It has, however, increased again over the last two years, while consumer spending has remained sluggish. This box analyses the main economic factors behind this recent rise in the saving rate and explores the near-term implications for private consumption.
Chart A
Household saving rate (percentage of gross disposable income)

Sources: ECB and Eurostat (QSA) and ECB calculations.
Notes: Seasonally adjusted data. The pre-pandemic average is computed from the first quarter of 1999 to the fourth quarter of 2019.
Strong income growth has contributed to the recent increase in the household saving rate. Real household income has increased by 3.8% over the last two years, thanks to strong growth in both labour and non-labour components (Chart B). The increase in non-labour income, which includes income from self-employment, net interest income, dividends and rents, is particularly favourable for savings.[3] This reflects the fact that non-labour income mainly accrues to richer households, who generally save more than poorer households.[4] In addition, fiscal policy has also supported real income growth since the third quarter of 2022. This can be largely attributed to the discretionary measures to mitigate the impact of the energy price shock, including substantial non-targeted income support. Since richer households have also benefited from the measures and consume a smaller share of their income, this may also have contributed to a higher saving rate.[5]
Chart B
Developments in real household income (percentage changes since the second quarter of 2022 and percentage point contributions)
Sources: Eurostat, ECB and Eurostat (QSA) and ECB calculations.
Notes: Seasonally adjusted data. Labour income is calculated as compensation of employees and non-labour income includes income from self-employment, net interest income, dividends and rents; fiscal income is measured as a residual. To obtain real values, all household income components are deflated using the private consumption deflator from the national accounts.
Although their income has risen strongly over the last two years, households have remained cautious about their spending. Following a post-pandemic rebound, real private consumption growth weakened markedly in the context of surging inflation and the subsequent tightening of monetary policy. The rise in inflation was driven in large part by a strong increase in energy and food prices, which led to a relatively sharp decline in the consumption of these goods.[6] The subsequent increases in interest rates encouraged saving and likely dampened the consumption of goods more than the consumption of services. The consumption of durable goods was particularly affected, as it is more sensitive to interest rates than services are.[7] Overall, consumption of goods fell back below its pre-pandemic level at the beginning of 2023 and has largely stagnated in the last two years. At the same time, consumption of services has continued to rise, but at a more moderate pace (Chart C).
Chart C
Real household consumption of goods and services (Q4 2019 = 100)

Sources: Eurostat and ECB calculations.
Notes: Seasonally adjusted data. Goods consumption and services consumption are based on the aggregation of available data on real household consumption by purpose.
With the surge in inflation, households’ real net wealth declined in the past two years, increasing the incentives for them to rebuild their wealth. The net wealth of households, which includes real estate assets, deposits, bonds and shares, minus debt liabilities, rose significantly in the wake of the pandemic, supported by the accumulation of pandemic-related savings. It continued to increase after the pandemic in nominal terms, albeit at a more moderate pace (Chart D).[8] In real terms, however, household net wealth began to decline in 2022 and fell back to its pre-pandemic level in the course of 2023. This decline has likely contributed to the recent increase in the household saving rate, as households have been incentivised to rebuild their real net wealth.[9]
Chart D
Household net wealth (Q4 2019 = 100)

Sources: Eurostat, ECB and Eurostat (QSA) and ECB calculations.
Note: To obtain real values, household net wealth is deflated using the private consumption deflator from the national accounts.
A time-series model for household consumption using standard macroeconomic determinants helps to shed more light on the economic factors behind the recent increase in the saving rate. A reduced-form error correction model combines both long-term and short-term dynamics to explain quarterly consumption growth.[10] The level of real household consumption is driven in the long term by the level of real household income, the real net wealth of households and real interest rates. In the short term, other cyclical factors, such as consumer confidence which reflects precautionary saving motives, also play a role in explaining consumption dynamics. The model decomposes the change in the household saving rate into four factors – income, wealth, interest rates and consumer confidence – taking growth in real household income as given.[11]
Empirical evidence suggests that rising real incomes and high real interest rates, together with negative real wealth effects, have pushed up household savings over the past two years. According to the model results, the increase in the household saving rate between the second quarter of 2022 and the second quarter of 2024 can be largely attributed to income effects, as households’ consumption did not adjust immediately to the strong rise in real incomes. Interest rate effects and wealth effects played an important role as well (Chart E). At the same time, precautionary motives also had a positive impact on savings − particularly in 2022 following the Russian invasion of Ukraine, which led to a fall in consumer confidence. However, the importance of such motives seems to have decreased, as consumer confidence has gradually recovered from its slump in the second half of 2022.[12] Finally, the change in the saving rate over the past two years cannot be fully explained by the factors outlined above. This is highlighted by the unexplained part in the decomposition, which points to unmodeled factors that together have weighed on the increase in the saving rate since mid-2022. However, this cumulative perspective masks the fact that the increase in savings over the last three quarters was larger than previously anticipated and suggested by the model. This most likely reflects stronger consumption inertia and a more gradual adjustment of households’ spending to their increasing purchasing power and diminishing negative shocks than implied by historical regularities.[13]
Chart E
Contributions to the change in the household saving rate: a model-based decomposition
(percentage point changes since the second quarter of 2022 and percentage point contributions)Sources: Eurostat, ECB, ECB and Eurostat (QSA) and ECB calculations.
Note: The chart shows the contributions of real household income, real net wealth, real interest rates and consumer confidence to the cumulative changes in the household saving rate since the second quarter of 2022, based on an estimated error correction model for private consumption growth and taking the growth in real household income as given.
Looking ahead, the household saving rate is likely to remain elevated in the near term but should decline below its current level further out. With the key factors – rising real incomes, elevated real interest rates and incentives to rebuild real wealth – likely to persist for some time, the saving rate is expected to remain high in the near term, albeit somewhat lower than its most recent peak, partly reflecting the moderating interest rates. The likely downtick in the saving rate together with continued strong growth in real labour income are expected to help the momentum of private consumption.

The quarterly sectors accounts (QSA) for the euro area are jointly compiled by the ECB and Eurostat.
See the box entitled “COVID-19 and the increase in household savings: precautionary or forced?”, Economic Bulletin, Issue 6, ECB, 2020.
See also the box entitled “A primer on measuring household income”, Economic Bulletin, Issue 8, ECB, 2023.
See, for example, Bańkowska, K. et al., “ECB Consumer Expectations Survey: an overview and first evaluation”, Occasional Paper Series, No 287, ECB, December 2021.
See the article entitled “Fiscal policy and high inflation”, Economic Bulletin, Issue 2, ECB, 2023.
See the boxes entitled “The impact of higher energy prices on services and goods consumption in the euro area”, Economic Bulletin, Issue 8, ECB, 2022, and “How have households adjusted their spending and saving behaviour to cope with high inflation?”, Economic Bulletin, Issue 2, ECB, 2024.
See the box entitled “Monetary policy and the recent slowdown in manufacturing and services”, Economic Bulletin, Issue 8, ECB, 2023.
See the box entitled “Household savings and wealth in the euro area – implications for private consumption”, Winter 2024 Economic Forecast, European Commission, 2024.
For a detailed analysis of the impact of inflation and monetary policy on the wealth distribution, see the article entitled “Introducing the Distributional Wealth Accounts for euro area households”, Economic Bulletin, Issue 5, ECB, 2024.
See also de Bondt, G., Gieseck, A., Herrero, P. and Zekaite, Z., “Disaggregate income and wealth effects in the largest euro area countries”, Working Paper Series, No 2343, ECB, December 2019.
The model parameters are estimated using data from the first quarter of 1999 to the last quarter of 2019. In order to obtain real values, household income and net wealth are deflated using the private consumption deflator from the national accounts. The real interest rate is measured by the three-month EURIBOR adjusted for the expected annual consumer price inflation rate from the European Commission’s consumer survey, which is backdated for the missing period from the first quarter of 1999 to the last quarter of 2003 using the actual annual HICP inflation rate. Consumer confidence is expressed in deviations from its long-term pre-pandemic average.
See the box entitled “Why are euro area households still gloomy and what are the implications for private consumption?”, Economic Bulletin, Issue 6, ECB, 2024.
Another factor which is not included in the model and may have contributed to the recently elevated saving rates relates to the high level of uncertainty about longer-term policy issues; see the box entitled “What are the economic signals from uncertainty measures?” in this issue of the Economic Bulletin.

 
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Last week, the Commerce Department’s Bureau of Economic Analysis announced that GDP and personal income increased in almost every U.S. state according to the latest data from their report on Gross Domestic Product by State and Personal Income by State, 3rd Quarter, 2024. 
Real gross domestic product increased in 46 states and the District of Columbia. The nation’s GDP grew at an annual rate of 3.1 percent in the third quarter and has grown by 12.6% under the Biden-Harris Administration.
In addition, Americans continue to make and spend more. Incomes increased in 49 states and the District of Columbia, with the biggest increases seen in Alabama, Arkansas, and Mississippi. Thanks to rising incomes, consumer spending increased by 3.7 percent, in the third quarter, the most since early 2023.
By industry, real GDP increased in 16 of the 23 industry groups, with retail trade and health care as the leading contributors to growth nationally. Retail trade, which increased in all 50 states and the District of Columbia, was the leading contributor to growth in 39 states.
Earlier this month, the U.S. Labor Department’s Bureau of Labor Statistics reported that the U.S. economy added over 227,000 new jobs in November – exceeding expectations. A record 16 million jobs have been created under the Biden-Harris Administration.
For more information, see our latest blog on the November Jobs Report.
 
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Paris, France – This week, Export-Import Bank of the United States (EXIM) Chair Reta Jo Lewis delivered remarks during the International Economic Forum of the Americas’ (IEFA) Conference of Paris and met with industry leaders in the pharmaceutical, finance, and renewable energy sectors. Over the course of the week, Chair Lewis highlighted EXIM’s efforts to promote U.S. technologies that can reduce emissions and support U.S. jobs.
In remarks during a panel titled, “Scaling Lower Carbon Economies at Speed,” Chair Lewis said that EXIM more than doubled its investments in clean energy and environmentally beneficial exports, growing from $1.1 billion in FY23 to a record $2.3 billion in FY2024. Additionally, following a discussion on artificial intelligence during the IEFA’s Annual Board of Governors meeting, Chair Lewis shared the importance of partnerships to foster innovation within sectors that are critical to national and global security and trade.
During the Conference of Paris Chair Lewis met with Mairead Lavery, President and CEO of Export Development Canada, and David Schwimmer, CEO of the London Stock Exchange Group. She also met with Cosmin Ghita, CEO of Nuclearelectrica, a partially state-owned Romanian nuclear energy company, where she shared how EXIM has supported nuclear energy projects including a $98 million loan for RoPower Nuclear S.A. in Romania. The financing provided through EXIM’s Engineering Multiplier Program (EMP) is being used to support pre-project services that are needed to develop a small modular reactor (SMR).
Chair Lewis also addressed Jolt Capital’s Annual LPs and CEOs meeting and outlined what EXIM is doing to support transformational export areas. During her remarks, Chair Lewis reaffirmed the United States’ deep ties to France, and reiterated how EXIM is focused on supporting deals with European companies and Jolt partners. Chair Lewis emphasized the critical role of public-private partnerships in financing key export areas.
 
Compliments of the Export-Import Bank of the United StatesThe post EXIM Bank | Export-Import Bank of the U.S. Chair Reta Jo Lewis Highlights EXIM’s Clean Energy Deals and Work with E.U. Companies During the International Economic Forum of the Americas’ Conference of Paris first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

On 27 November 2024, in a speech to the European Parliament, President of the European Commission Ursula von der Leyen announced her decision to convene a Strategic Dialogue on the Future of the Automotive Industry in Europe. The Dialogue will be officially launched already in January 2025, with a view to swiftly proposing and implementing measures the sector urgently needs.
Commission President, Ursula von der Leyen, said: “The automotive industry is a European pride and is crucial for Europe’s prosperity. It drives innovation, supports millions of jobs, and is the largest private investor in research and development. Each sector has unique needs, and it is our responsibility to tailor solutions that are both clean and competitive. We need to support this industry in the deep and disruptive transition ahead. And we must ensure that the future of cars remains firmly rooted in Europe. This is why I have called for a Strategic Dialogue on the Future of the European Car Industry. We will launch this Dialogue already in January, to shape together our shared future.”
As the European automotive and supplier industry goes through a deep and disruptive transition, the Strategic Dialogue will design concrete strategies and solutions to support the global competitiveness of automotive manufacturing in Europe. It will focus in particular on:

boosting data-driven innovation and digitalisation, based on forward-looking technologies such as AI and autonomous driving.
supporting the sector’s decarbonisation, in an open technological approach, given its role in achieving Europe’s ambitious climate goals.
addressing jobs, skills, and other social elements in the sector.

simplifying and modernizing the regulatory framework.

increasing demand, strengthening the financial resources of the sector and its resilience and value chain in an increasingly competitive international environment.

The Strategic Dialogue brings together key stakeholders from across the industry, including European automotive companies, infrastructure providers, trade unions and business associations, as well as parts of the automotive value chain and other stakeholders.
The formal launch, under the President’s personal leadership, will be followed by a series of thematic meetings, chaired by Members of the College.
These meetings will result in a set of recommendations that help build a holistic EU strategy for the sector to manage the various challenges and where needed adapt the applicable EU regulatory framework accordingly. Summit meetings, led by the President, will check on progress made and give the necessary political impulses for further work.
The Council and European Parliament will be closely involved in the process and will be regularly informed and consulted on the Dialogue.
For more information, please contact:

Paula Pinho, Chief Spokesperson, EUROPEAN COMMISSION

Arianna Podesta, Deputy Chief Spokesperson, EUROPEAN COMMISSION

 
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Bipartisan legislation will modernize the EDA and other regional commissions whose mission is to spur economic growth in communities across the country
The U.S. Department of Commerce’s Economic Development Administration (EDA) celebrates its historic reauthorization by Congress, allowing it to continue its legacy of promoting American innovation and competitiveness by providing grants and support to communities across the country. Since 1965, EDA has led some of the nation’s most impactful programs to strengthen public works and infrastructure, job creation and workforce development, disaster recovery, and technology and industry advancement. EDA has not been formally reauthorized since 2004.
“Reauthorization will allow EDA to continue meeting its mission of ensuring communities across the country have the resources they need to expand economic opportunity, invest in innovation, and recover from disasters. This bipartisan support from Congress will allow EDA to evolve, modernize, and provide the services that communities across the nation need to build resilient, thriving local economies,” said U.S. Secretary of Commerce Gina Raimondo. “EDA’s investments have helped countless communities invest in their local workers and businesses, and reauthorization means they will continue creating and saving jobs, and bringing new investment to every corner of our country.”
From the period of January 2021 through November 2024, EDA was responsible for directing nearly $6 billion in investments in 3,393 awards across nearly every state and federal territory. These projects are creating or saving more than 554,700 jobs and generating more than $67.7 billion in private investment. These investments include hundreds of construction projects, creating thousands of good-paying jobs that modernize American infrastructure and support long-term, resilient economic growth.
“The country has changed since EDA was last authorized, with new industries, new challenges, and the residual impacts of a global pandemic and the rising intensity of natural disasters. Over the last 20 years, EDA has evolved to ensure its programs make America’s communities more competitive, resilient, and secure. This reauthorization legislation will allow EDA to continue to meet the moment for generations to come,” said Acting Assistant Secretary for Economic Development Cristina Killingsworth.
Key benefits of EDA’s reauthorization include:

Strengthening Tools to Support EDA’s Role in Job Creation and Placement: 

Codifies EDA’s role in establishing industry-led workforce training partnerships that invest in innovative approaches to workforce development that will secure job opportunities for Americans.
Aligns EDA to better support other key Department of Commerce priorities, including:

Supply Chain and Manufacturing: including elements of The ONSHORE Act for prospective site development in industries with national security implications
Broadband: Modernizes EDA’s ability to deliver broadband projects via inclusion of the E-BRIDGE Act

Modernizing EDA’s Authorities for Critical Grants and Resource Delivery

Establishes the Office of Disaster Recovery and Resilience: EDA is uniquely positioned to coordinate federal support for regional disaster recovery efforts in partnership with its extensive network of Economic Development Districts (EDDs), University Centers, and other stakeholders in designated impact areas.
Adds and modernizes eligibility criteria considerations, allowing for the consideration of additional key statistical factors to support grantmaking.

Improving EDA Operational Efficiency and Transparency

Codifies an EDA definition of pre-development enabling EDA to provide assistance to distressed communities to prepare for much larger infrastructure investments in the future.
Permanently enacts EDA’s disaster hiring authority enabling it to quickly respond to meet the needs of future disasters.
Formalizes the relationship between EDA and Regional Commissions, increasing efficacy of regional programs.

EDA’s reauthorization is a critical component of the Thomas R. Carper Water Resources Development Act of 2024, which passed with bipartisan support in Congress.
“EDA is driving our nation’s job growth, building resilient supply chains, and investing in our local economies. Reauthorizing the EDA will give this critical agency the tools and resources it needs to better support local businesses and organizations and equip our communities with climate-resilient infrastructure, in turn strengthening both local and regional job creation and our competitiveness abroad,” said EPW Chairman Senator Tom Carper in a previous statement.
“This reauthorization will help the EDA carry out its mission to drive investment, create jobs, and grow our local economies, particularly in rural states like mine of West Virginia. I appreciate Chairman Carper, Senator Cramer, and Senator Kelly for joining in this effort to reauthorize the EDA,” said EPW Ranking Member Senator Shelley Moore Capito
“I am proud to have helped negotiate this package to reauthorize the Economic Development Administration and recognize the importance of tourism and outdoor recreation for economic development…,” said Ranking Member of the House Subcommittee on Economic Development, Public Buildings and Emergency Management, Representative Dina Titus in a previous statement.
“This measure also includes important provisions to reauthorize and modernize federal economic development programs…. I want to thank Ranking Member Rick Larsen, Subcommittee Chairman David Rouzer, Subcommittee Ranking Member Grace Napolitano, as well as Chairman Carper and Ranking Member Capito in the Senate, for their hard work in developing and negotiating this final measure,” said Transportation and Infrastructure Committee Chairman Sam Graves in a previous statement.
“…I applaud today’s passage of the Water Resources Development of 2024… “This legislation also includes provisions to grow the economy and create jobs by reauthorizing the Economic Development Administration…T&I Democrats remain focused on delivering good-paying jobs and safer, cleaner, greener and more accessible transportation for all Americans,” said Ranking Member of the House Committee on Transportation and Infrastructure, Representative Rick Larsen. 
About the U.S. Economic Development Administration (www.eda.gov)
The mission of the U.S. Economic Development Administration (EDA) is to lead the federal economic development agenda by promoting competitiveness and preparing the nation’s regions for growth and success in the worldwide economy. An agency within the U.S. Department of Commerce, EDA invests in communities and supports regional collaboration in order to create jobs for U.S. workers, promote American innovation, and accelerate long-term sustainable economic growth.
 
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Cash most frequently used payment method in stores, although use has continued to decline
Share of digital payment instruments continues to increase in value terms, with cards still dominant and share of mobile apps on the rise
Majority of consumers value having option to pay with cash

The European Central Bank (ECB) today published the results of the latest study on the payment attitudes of consumers in the euro area (SPACE). Despite the trend towards digital payments, the number of cash payments remains significant in 2024, especially for small-value and person-to-person payments.
In terms of number of payments, cash is used at the point of sale in 52% of transactions, down from 59% in 2022. In terms of value, cards are the most dominant payment instrument (with a share of 45%, down from 46%), followed by cash (39%, down from 42%) and mobile apps (7%, up from 4%).
The growing share of digital payments is supported by an increase in online payments; these account for 21% of consumers’ day-to-day payments in number and 36% in value, up from 17% and 28% respectively in 2022. The most frequently used instrument for online payments is cards, accounting for 48% of transactions, followed by other electronic means of payment such as payment wallets and mobile apps, which together accounted for 29% of transactions.
Consumers’ stated payment preferences have not changed. In 2024 as in 2022, 55% of consumers prefer paying with cards and other non-cash means in shops, 22% prefer paying with cash and 23% have no clear preference. On average, consumers deem cards faster and easier to use. They consider cash more helpful for managing their expenses and protecting their privacy.
A majority of consumers (62% in 2024, up from 60% in 2022) consider it important to have cash as a payment option. And a large majority (87%) are satisfied with their access to cash, finding it very or fairly easy to withdraw cash from an ATM or a bank, even though satisfaction decreased slightly (down from 89% in 2022).
Executive Board member Piero Cipollone reaffirmed the ECB’s commitment to protecting consumers’ freedom to pay as they choose. “We are dedicated to ensuring secure, efficient and inclusive payment options. By supporting both cash and the development of a digital euro, we want to guarantee people can always choose to pay with public money, now and in the future.”
 
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Blog post by Colm Bates, Vasco Botelho, Sarah Holton, Marc Roca I Llevadot and Mirko Stanislao | The growth of negotiated wages is expected to ease in 2025. This is the information emerging from the ECB wage tracker, which we will publish on a regular basis from now on. The ECB Blog explains the tool and how it can help monitor wage pressures in the euro area.

Wages are an important driver of domestic goods and services inflation. Most wages are negotiated in advance as trade unions and employer associations agree on contracts for one, two or even three years. The ECB and the national central banks of the Eurosystem developed a measurement tool to benefit from this situation. The “wage tracker” – as we call it – allows us to analyse current and future wage pressures in the labour market. It currently covers developments in Germany, France, Italy, Spain, the Netherlands, Greece and Austria.[1] From now on we will publish the results every six to eight weeks, just after the monetary policy decisions of the Governing Council. Here we explain the tracker and how it informs us about upcoming wage pressures.
What is the ECB wage tracker?
The ECB wage tracker uses granular data from collective bargaining agreements – that means it collects and aggregates information from thousands of these agreements between trade unions and employer associations, contract by contract.[2] The set of tracker indicators provides information on negotiated wages, with and without one-off payments, and on the share of employees covered by the tracker at each point in time.[3]
The novelty of the tracker is that it is based on agreements that are already in place.[4] That means that it already provides insights into wage increases that may only take effect in the future. The tracker is not a forecast tool, however, as future wage growth also depends on future wage agreements. But it does complement other sources used to monitor and anticipate wage pressures, which are affected by changes in economic growth, labour market conditions and inflation. Therefore, Eurosystem and ECB staff macroeconomic projection exercises still provide the best forecast for wage developments.
Another benefit of the wage tracker is that it is timelier than other wage growth indicators. Other wage pressure indicators, like compensation per employee or the ECB indicator of negotiated wages, are usually available only with a delay of more than two months. In contrast, the wage tracker data are available within a few days, thanks to the very short processing time. This allows for an almost immediate update. In addition, the forward-looking aspect of the tracker helps to anticipate trends and potential turning points.
Let us put the forward-looking feature aside for a moment and focus on how well the wage tracker captures past developments in other aggregate negotiated wage series. To do so we have constructed monthly indicators of negotiated wages using national sources, either including or excluding one-off payments, for the aggregate of countries.[5] Chart 1 shows that the tracker series (lines in blue and red), though not identical, closely follow the corresponding indicator of negotiated wages (in yellow).[6] That holds true both with or without one-off payments, and adds to the confidence that the wage tracker is a robust measure of wage pressures.
Negotiated wage pressures started increasing in 2022
From 2013 until the end of 2019, all wage tracker indicators suggested mild negotiated wage growth of 1.7% per year on average for the seven countries covered. The subdued wage growth during this period was a pervasive feature of the euro area, thoroughly analysed.[7] The low wage inflation in the euro area was also assessed as part of the last ECB Strategy Review.[8] In a nutshell, the relatively weak wage pressures coincided with low consumer price inflation and strong job creation, with these countries recording 10 million new employees during this period.[9]
The pandemic-related economic shutdown and job retention schemes kept negotiated wage pressures weak in 2020 and 2021.[10] During this time negotiated wage growth averaged 1.4% per year. The subsequent inflation surge gave rise to a gradual increase and a stronger prevalence of one-off payments used to compensate employees for the effects of high inflation. During this period, the ECB tracker suggested accelerated wage growth, to 2.9% in 2022 and 4.2% in 2023, and is currently suggesting wage growth of around 4.7% on average in 2024 so far.[11]

Chart 1
ECB wage tracker: backward looking information and comparison with the indicator of negotiated wages

Including one-off payments
Yearly growth rates, in percentages

Excluding one-off payments
Yearly growth rates, in percentages

Sources: ECB calculations based on data provided by the Deutsche Bundesbank, Banco de España , Ministerio de Empleo y Seguridad Social, Dutch employers’ organization AWVN, Centraal Bureau voor de Statistiek, Osterreichische Nationalbank, Statistik Austria, Bank of Greece, Banca d’Italia, Istituto Nazionale di Statistica (ISTAT), Banque de France, Eurostat, and Haver Analytics. Notes: The ECB wage tracker is based on micro-level data on wage agreements since 2013 for Germany, France, Italy, Spain, and the Netherlands, since 2016 for Greece, and since 2020 for Austria. The indicator of negotiated wages uses national sources since 2013 for Germany, France, Italy, Spain, the Netherlands, and Austria. There is no negotiated wages data available for Greece during this period. Aggregation across countries is based on compensation of employees’ weights for the ECB wage tracker and for the indicator of negotiated wage growth among the available wage tracker countries. Latest observations: November 2024 for the wage tracker indicators (blue and red lines), and September 2024 for the indicators of negotiated wages constructed using national sources (yellow lines).

Negotiated wage pressures expected to gradually ease
Now let’s look at what the wage tracker signals for the near future. The data currently cover agreements signed up to November 2024. Chart 2 shows the forward-looking information on negotiated wage growth in active agreements until December 2025.[12] All series are expected to ease over the course of 2025. That holds especially true for those series that include base effects stemming from one-off payments that were paid in 2024 and that will not be paid again in 2025. The headline ECB wage tracker is currently anticipated to peak at around 5.4% at the end of 2024 before gradually easing to an average of 3.2% during 2025. The tracker with unsmoothed one-off payments is currently averaging 4.8% in 2024 and implies a decrease to 2.7% in 2025.[13] The tracker excluding one-off payments stands at 4.2% in 2024 and gradually eases to 3.8% in 2025.
The differences between the sub-indicators with and without one-off payments result from more frequent one-off payments to compensate for inflation following the recent inflation surge. These differences are expected to eventually narrow as wage negotiations adapt to lower inflation.
The tracker’s coverage shows the share of employees that are covered by the collective bargaining agreements in the database. That ratio is crucial for understanding how representative the wage signals in the data are. Coverage averaged 47.4% of the total number of employees in the participating countries between 2013 and 2023. The forward-looking coverage decreases as the active agreements followed by the tracker expire over time, from an average of 50.2% in 2023, to 47.4% in 2024, and then to 32% in 2025. As coverage drops, so does the reliability of the wage signals provided by the tracker. This waning reliability is a structural feature and can be quite heterogeneous by country, depending on the contract durations and the timing of wage negotiations.[14]

Chart 2
ECB wage tracker: forward looking information and employees’ coverage

Left hand side: Yearly growth rates, in percentages. Right hand side: share of employees among the participating countries, in percentages.

Sources: ECB calculations based on data provided by the Deutsche Bundesbank, Bank of Greece, Banco de España, Banca d’Italia, Banque de France, Dutch employers’ organization AWVN, Osterreichische Nationalbank, and Eurostat. Notes: The euro area aggregate for the wage tracker is based on micro data on wage agreements since 2013 for Germany, France, Italy, Spain, and the Netherlands, since 2016 for Greece, and since 2020 for Austria. Aggregation across countries is based on compensation of employees’ weights. The coverage series uses the number of employees covered in the wage tracker countries, as a ratio to the total number of employees in these countries. The solid lines correspond to the period for which there is information for both the ECB wage tracker and the indicator of negotiated wages (until September 2024). Dashed lines denote periods in which only the ECB wage tracker is available, including its forward-looking part spanning from December 2024 until December 2025.
Latest observations: November 2024.

Overall, the ECB wage tracker is a valuable tool for understanding negotiated wage dynamics in the euro area, which have reached an all-time high following the post-pandemic reopening and inflation surge but are expected to ease in 2025. The information from the wage tracker informs monetary policy discussions about negotiated wages and their future trajectory. The ECB wage tracker is not a forecast and should be interpreted with caution depending on the employee coverage over time and across countries. While the wage pressures indicated by the forward-looking wage tracker will change as more contracts are agreed and the coverage increases, they still provide a good indication of the direction of wage pressures and confirm the profile in the ESCB staff projections, which foresee easing wage pressures in 2025.
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.
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The euro area countries currently in the wage tracker data comprise on average 87% of the compensation of employees in the euro area and 85% of the euro area employees between the first quarter of 2013 and the third quarter of 2024. Ahead of publication, the wage tracker data infrastructure was upgraded, and the methodology has been thoroughly reviewed.
The ECB wage tracker data can be assessed and downloaded here. Please also see the press release accompanying the launch of the wage tracker.
The headline “ECB wage tracker” aims to track the annual growth of employees’ salaries at any point in time and includes one-off payments smoothed over the twelve months that follow each payment. As one-off payments can make series very volatile, smoothing them renders the series easier to interpret and more aligned to their economic intent (that they cover a period of time even if they are disbursed in one payment). The ECB wage tracker also publishes an indicator with unsmoothed one-off payments.
See Lane, P. (2024), “Underlying inflation: an update”, Speech at the Inflation: Drivers and Dynamics Conference 2024 organised by the Federal Reserve Bank of Cleveland and the ECB, and Bing, M., S. Holton, G. Koester, and M. Roca I Llevadot (2024): “Tracking euro area wages in exceptional times”, ECB Blog post, 23 May 2024 for some examples. Also, see Gornicka, L. and G. Koester (eds) (2024): “A forward-looking tracker of negotiated wages in the euro area”, Occasional Paper Series, No 338, ECB.
The wage tracker with unsmoothed one-offs closely follows the ECB indicator of negotiated wages at the quarterly level.
While in principle both datasets are comparable, there can be differences in the coverage and in the underlying details considered in the micro-level data between the tracker and the national indicators of negotiated wages. At a conceptual level, there is also a key difference is for Italy, where the tracker includes one-off payments, and the indicator of negotiated wages does not.
See Nickel, C., E. Bobeica, G. Koester, E. Lis, and M. Porqueddu (2019), “Understanding low wage growth in the euro area and European countries”, ECB Occasional Paper, No 232, September 2019.
See Koester, G., E. Lis, C. Nickel, C. Osbat, and F. Smets (2021), “Understanding low inflation in the euro area from 2013 to 2019: cyclical and structural drivers”, Occasional Paper, No 280, September 2021.
See Bodnár, K. (2018), “Labour supply and employment growth”, ECB Economic Bulletin, Issue 1/2018 for further details on the role of labour supply for employment growth since 2013.
See Anderton, R., V. Botelho, A. Consolo, A. Dias da Silva, C. Foroni, M. Mohr, and L. Vivian (2020), “The impact of the COVID-19 pandemic on the euro area labour market”, ECB Economic Bulletin, Issue 8/2020.
One-off payments were used to compensate for the inflation surge. The wage tracker with unsmoothed one-off payments was 3.1% in 2022, 4.2% in 2023, and 4.8% in 2024, while excluding one-offs it stood at 2.6%, 3.7%, and 4.2%, respectively.
A collective bargaining agreement is considered to be active from (1) the first date between the signing date, the starting date of the agreement, and the date of the first wage increase, until (2) the last date between the end date and the date of the last non-missing wage increase plus 12 months, to consider all possible base effects from these wage increases. There are two country-specific exceptions. In Italy, in addition to the previous rule, collective bargaining agreements are set to be active until the last date between the end date of the agreement and the current cut-off date for data, which stands for November 2024. This is because wage negotiations might take a relatively long time in Italy and are established for a long period of time; furthermore, expired agreements are still valid until a new agreement is reached. For France, in addition to the rule above, and because contracts need to be re-negotiated every year, but do not need to reach an agreement, a different approach needs to be taken. For this country, the wage tracker extends for 12 months with zero wage increases all contracts that have expired in the current year until the cut-off date for data. Because the underlying data for France is compiled at the quarterly level, as in the indicator of negotiated wages, this cut-off-date is set at the end of the relevant quarter (December 2024). This approach might imply that the wage tracker methodology provides a lower bound for negotiated wage growth in France in some months, which would then be revised upwards by updating the data of those expired contracts that reach an agreement.
This indicator stood at 7.2% in March 2024, at 8.5% in July 2024, and at 6.5% in August 2024, following the strong one-off payments that are compiled from the micro-level data. For July 2024, the strongest one-off payment in the ECB wage tracker dataset came from the retail sector in Germany, which led to an overshooting in comparison to the indicator of negotiated wages. Large one-off payments give rise to negative base effects, which will be displayed one year later. In the current data release, the ECB wage tracker with unsmoothed one-off payments stands at 1.7% in March 2025, at 0.4% in July 2025, and at 1.7% in August 2025.
Information on the coverage at the country-level can be found in the technical details of the ECB wage tracker press release.

 
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