The eurozone economy defied expectations in the second quarter of 2026, posting 0.4% quarter-on-quarter growth according to Eurostat's preliminary estimate. That marks a clear improvement from the flat reading in Q1 and beat the consensus forecast of 0.2%. Across the wider European Union, growth accelerated to 0.5%, up from 0.1% in the previous quarter. On an annual basis, the euro area expanded by 1.0%, while the EU as a whole grew by 1.2%.
At first glance, the figures suggest the bloc is weathering higher energy prices and geopolitical uncertainty better than many feared. But beneath the headline, the growth story is becoming increasingly uneven across member states.
Ireland, Lithuania, and Sweden lead the pack
Ireland posted by far the strongest quarterly expansion, with GDP surging 3.9%. According to Pantheon Macroeconomics, the rebound in Ireland alone added 0.1 percentage points to headline eurozone growth. Lithuania followed with 1.7% growth, while Sweden expanded by 1.4%.
Southern Europe also showed resilience. Portugal recorded 0.8% quarterly growth, and Spain continued to outperform the eurozone's largest economies with a 0.7% expansion. At the other end of the ranking, Belgium and Austria stagnated, recording no growth during the quarter.
Germany, France, and Italy all expanded, but at a slower pace than previously. Germany's economy grew by 0.2%, slowing from 0.4% in Q1 but still beating market expectations of 0.1%. Pantheon's chief eurozone economist Claus Vistesen noted that the data leave "a picture of resilience in the first half of the year," helped by upward revisions to previous quarters. However, the composition of growth was revealing: "Net exports were the main driver of Q2 GDP growth, while consumption slowed and investment fell," Vistesen said, suggesting Germany is relying more on foreign demand than domestic spending.
France returned to growth with a 0.2% rise after contracting in the previous quarter, but the details were less convincing. Vistesen said "the rebound in GDP growth is encouraging, but the details are less so, particularly for investment," pointing to weak capital spending despite a recovery in consumer demand.
If there was one large economy that continued to defy expectations, it was Spain. GDP accelerated to 0.7%, extending a run that has consistently outpaced its eurozone peers. "The Spanish economy appears to have been unscathed by the energy shock so far," said Ankita Amajuri, Europe economist at Pantheon Macroeconomics. Strong household spending, resilient exports, fiscal support, and the country's growing renewable energy capacity have all helped cushion consumers from rising energy prices. For more on Spain's housing market dynamics, see our analysis of the rental crisis.
Italy also expanded by 0.2%, slowing from 0.3% but beating expectations of 0.1%. Amajuri cautioned that "Italy's economy is more vulnerable to the recent surge in energy prices than Spain's," making it one of the eurozone economies most exposed if energy costs remain elevated through the second half of the year.
Inflation stirs again
Just as growth appears to be regaining momentum, another challenge is beginning to re-emerge. Early inflation readings for July suggest price pressures are picking up again across parts of Europe. Pantheon Macroeconomics estimates German headline inflation rebounded to around 2.7% in July from 2.3% in June, after regional data showed stronger price growth in Bavaria, North Rhine-Westphalia, Saxony, and Hesse. Spain also reported firmer inflation: preliminary data showed consumer prices rose by 3.5% year-on-year in July, up from 3.2% in June and the highest reading since May 2024. Core inflation, which strips out energy and unprocessed food, edged up to 3.0%.
Attention now turns to Thursday's eurozone inflation release, with economists expecting annual inflation to edge up to 2.9% in July from 2.8% in June. This comes after June's inflation slip to 2.8%, which had strengthened the case for the ECB to hold rates. The renewed price pressures could complicate the ECB's policy path, especially as the bank has also ordered the eurozone's largest banks to fortify defenses against AI cyber threats, as we reported earlier.
Overall, the latest figures suggest the eurozone entered the summer on firmer footing than many economists had expected. But they also point to a bloc growing at different speeds: Ireland recorded the strongest quarterly growth, Spain remains the strongest of the major economies, while Germany, France, and Italy are expanding at a much more modest pace. With inflation stirring again, the recovery's durability remains uncertain.
