Euro zone companies are struggling to raise prices for consumers already struggling with a rise in fuel costs, with fierce competition from China compounding tough market conditions, a European Central Bank survey showed on Friday.

Challenges in Raising Prices

The ECB kept interest rates on hold a day earlier, saying it was seeing little or no sign that higher fuel costs were spreading broadly to consumer prices, wages and long-term expectations. Companies had raised prices by less than expected in the three months to June and were expecting a slight moderation in the current quarter, the survey showed.

Around 40% of companies contacted said that prices in their sector had increased, especially in intermediate goods and transport, which are directly affected by the price of oil and its derivatives. However, for businesses closer to the consumer, there had been “little adjustment” so far as households remained “very price sensitive”.

Food retailers said that higher fuel prices in the second quarter left less money for spending on other items and reinforced the tendency for consumers to shift away from branded products to private labels. General market conditions were tough, with Chinese manufacturers increasingly offering innovative products at low prices.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.