With the artificial intelligence investment wave sweeping across the globe, strong demand for high-performance memory chips and core electronic components is quietly reshaping pricing trends in Europe's consumer goods market.
According to the latest research estimates from Goldman Sachs, the upward pull of AI-related hardware on eurozone non-energy industrial goods (i.e., core goods) inflation has risen significantly, with its contribution rate reversing from negative 0.1 percentage points in February this year to positive 0.2 percentage points in September. Supported by this, the year-on-year inflation rate for eurozone core goods climbed steadily from 0.7% in February to 1.1% in September; looking at the more sensitive short-term momentum, the three-month annualized gain surged from stagnation at the start of the year to 2.9% in September.
It is worth noting that while European core goods and energy prices have risen in tandem recently, Goldman Sachs, after stripping out the energy variable, found that the recent acceleration in core goods cannot be attributed solely to oil and gas costs. Germany's adjustment of statutory health insurance reimbursement rules pushed up out-of-pocket drug costs, the surge in precious metals drove up jewelry prices, and the price increases for computers and hardware equipment have become a new cost push that cannot be ignored. Taking memory cards as an example, even though their weight in the core goods basket is only 0.12%, this single category alone contributed 4 basis points to core goods inflation in September.
Transmission lags extend price highs, but overall core inflation impact remains limited
Faced with rising upstream raw material prices, the price increase process for consumer electronics end products shows obvious lag. Goldman Sachs' equity strategy team analysis suggests that although upstream memory prices have gradually approached their cyclical peak, there is a time lag in transmitting costs to downstream end products. This means that the price peaks for consumer electronic devices such as mobile phones, personal computers, and game consoles will appear relatively late and may remain at high levels for a longer period.
According to Goldman Sachs' bottom-up forecast model: for the three major end-product categories of mobile phones, information processing equipment, and recording media, by the end of 2026, they are expected to add about 8 basis points to the baseline core goods inflation forecast, and by the end of 2027, a further 7 basis points; if energy-sensitive categories are included, by the end of 2026 and 2027, core goods inflation could be 0.1 and 0.2 percentage points higher than current forecasts, respectively; however, this upward trend does not have long-cycle stickiness, and by the end of 2028, its net impact on core goods inflation is expected to turn to negative 0.3 percentage points.
Goldman Sachs particularly emphasizes that because electronic hardware has a low weight in the overall core inflation indicator that includes services, the cumulative pull on overall core inflation forecasts over the next two years is only about 0.05 percentage points, and there is currently insufficient evidence to prove that AI hardware will persistently push up European medium-term inflation.
ECB closely watches wage and corporate pricing dynamics
Faced with new variables on the goods side, the European Central Bank has not rushed to adjust its current monetary pace. At its latest policy meeting, decision-makers unanimously decided to hold steady, with the core consideration being that energy-driven inflation disturbances have not yet evolved into a dangerous second-round spillover effect. ECB Governing Council member and Bank of Italy Governor Fabio Panetta recently publicly stressed that the core of current monetary policy is to strictly prevent price rise expectations from becoming entrenched among households and businesses, avoiding falling into a difficult-to-reverse "wage-price" spiral. He pointed out that given that inflation is biased to the upside and may remain above target for a longer period, the possibility of further rate hikes still exists; but at the same time, the recent rise in bond yields has substantially tightened borrowing conditions, and the ECB must remain prudent when making discretionary decisions.
The ECB's quarterly survey of large enterprises also confirms potential bargaining pressure. The survey shows that the proportion of respondents expecting employees to demand higher pay jumped sharply from 20% in July to 40%. However, corporate expectations for actual future wage growth are still mildly softening, expected to decline from 3.2% in 2025 to 2.9% in 2027 year by year. In terms of the ability to pass costs downstream, there is a stark divergence across industries. Among end-product companies facing ordinary consumers, as many as 90% said costs could only be "limitedly or partially" passed on to customers; in contrast, B2B companies serving corporate clients have significantly stronger pass-through capabilities. As companies generally expect factory gate price increases to moderate in the coming months, the ECB is still continuing to examine whether this round of price fluctuations driven by industrial demand and structural costs will stop at localized transmission or ultimately change the underlying tone of inflation.
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