Key facts
- Eurozone GDP grew 0.4% in Q2 2026, exceeding forecasts.
- Ireland led growth with a 3.9% quarterly expansion.
- Germany, France, and Italy showed slower growth rates of 0.2%.
- Belgium and Austria reported no growth in the quarter.
- Inflation is showing signs of resurgence in July, with German inflation at 2.7% and Spanish at 3.5%.
The Eurozone economy demonstrated unexpected resilience in the second quarter of 2026, with GDP expanding by 0.4% quarter-on-quarter, surpassing economists' expectations of 0.2% growth and improving from a flat performance in the first quarter. Across the wider European Union, growth accelerated to 0.5%.
However, this headline figure masks significant divergence in economic performance among member states. Ireland led the pack with a remarkable 3.9% quarterly GDP surge, followed by Lithuania at 1.7% and Sweden at 1.4%. Southern European economies also showed strength, with Portugal growing by 0.8% and Spain by 0.7%, outperforming larger economies.
At the other end of the spectrum, Belgium and Austria experienced stagnation, recording no growth. Major economies like Germany, France, and Italy all expanded, but at a more modest pace. Germany's economy grew by 0.2%, with net exports being the primary driver, while consumption slowed and investment fell. France also returned to growth with a 0.2% expansion, though investment details were less convincing. Italy expanded by 0.2%, but analysts caution it is more vulnerable to elevated energy prices than Spain.
Adding to the complex economic picture, early inflation data for July indicates a potential resurgence in price pressures. German headline inflation is estimated to have rebounded to around 2.7%, and Spanish consumer prices rose by 3.5% year-on-year, with core inflation edging up to 3.0%. Attention is now focused on the upcoming Eurozone inflation release, with economists anticipating an increase to 2.9% for July.