Euro zone business conditions improving, AI is booming, ECB survey shows

FRANKFURT (Reuters) -Euro zone firms are enjoying a slight improvement in business conditions but this still points to only modest growth, even if some sectors, such as AI, are booming, the ECB's survey of non-financial companies showed on Friday.

The ECB kept policy unchanged on Thursday, saying the economic outlook remained in line with its earlier projections for slow but steady growth as tariff headwinds are offset by consumption.

"Many firms were investing strongly in digital infrastructure, giving rise to substantially growing demand for software and databases, particularly cloud solutions, and AI," the ECB said.

Firms said these investments were particularly strong in the financial and public sectors and the increasing deployment of artificial intelligence was also starting to disrupt the business model of traditional consultancy firms.

Meanwhile, manufacturing, continued to struggle.

"Manufacturing output was still weighed down by tariffs, uncertainty and challenges to competitiveness as well as relatively muted growth in consumer goods spending, with little improvement anticipated in the short term," the ECB said.

Construction was, however, slowly turning the corner, and firms pointed to good or reasonable growth, linked especially to consumer spending on tourism and hospitality, and to investment in software, data solutions and artificial intelligence, the ECB added.

Consumer spending remained lacklustre, appliance and electronics manufacturers were more positive and contacts in tourism, hospitality and entertainment had grown strongly over the summer.

Machine investment still remained subdued but spending on AI was booming.

The survey also showed that the employment outlook remained relatively subdued, wage growth was moderating and selling price momentum was showing a further slight slowdown.

(Reporting by Balazs Koranyi, Editing by Timothy Heritage)

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