The euro area economy showed unexpected resilience in the third quarter of 2026, with GDP growing by 0.4% quarter-on-quarter, despite the ongoing energy shock. Excluding Ireland, growth was more modest at 0.2%. Spain led the growth among major economies with a 0.6% expansion, while Germany slowed to 0.2%, Italy stagnated, and France contracted by 0.1%. Consumption remained strong, supported by savings accumulated in recent years, but investment and exports weakened.
Looking ahead to the fourth quarter, the outlook is more challenging. Consumer confidence in Europe fell to, 17.9 points in October, weighed down by higher energy costs and political uncertainty. The euro area composite PMI dropped to 51.7, with France seeing the sharpest decline. Energy markets remain constrained by geopolitical tensions, and rising sovereign yields in France are adding to the economic pressures.
Inflation in the euro area rose to 4.0% in October, driven by higher energy prices, while core inflation remained stable at 2.5%. In the US, inflationary pressures also intensified, with headline PCE inflation rising to 3.6% year-on-year. The US economy grew by 0.8% in the third quarter, supported by strong consumption and investment, but job creation slowed significantly.
Emerging economies, led by China, continue to show resilience despite the energy shock. China's GDP grew by 1.2% in the third quarter, driven by industry and exports. However, challenges lie ahead, particularly for countries with limited fiscal headroom. The IMF maintained its global growth forecast at 3.1% for 2026, describing the environment as 'resilience under strain'.