Euro Area Q2 GDP Preview Better Than Feared

Economics Research 24 July 2026 | 9:08PM BST

Euro Area Q2 GDP Preview: Better Than Feared

BOTTOM LINE: We currently track Euro area GDP growth excluding Ireland at Giovanni Pierdomenico | +0.24%qoq. Given the sharp deterioration reported for Q1 (-7.0%qoq Goldman Sachs International non-annualised) and the sequential improvement in some hard indicators, we currently expect Irish growth at +1.1%, resulting in area-wide growth at +0.27%. We expect industrial and construction activity to support growth in Germany (+0.16%, above consensus) and Italy (+0.16%, above consensus). An improvement in consumption growth should support the French print (+0.21%, in line with consensus). We continue to see outperformance in Spain (+0.5%, below consensus) although we expect real consumption growth to moderate slightly.

Euro Area Q2 GDP Preview: Better Than Feared

The GDP data for Q1 was particularly volatile and subject to larger-than-usual revisions due to meaningful changes to the Irish figures. Quarter-over-quarter headline GDP growth was reported flat for the first three months of the year in the latest reading (vs. +0.15%qoq in the flash print and -0.22% in the second reading), with growth excluding Ireland firmer at +0.26%. Under the surface, however, details pointed to a moderation in ex-Ireland growth at the start of 2026, as real private consumption grew by +0.24% in Q1 (vs. +0.43% in Q4) and real investment contracted after positive readings throughout 2025.

Against this backdrop, the energy shock resulting from the Middle East conflict introduced further headwinds to growth going into Q2, resulting in a downgrade of our growth assumptions at the start of the quarter. Our area-wide GDP tracking thus moderated to a soft +0.1%qoq in late April as survey data pointed to meaningful deterioration in the growth momentum. Since then, hard indicators that directly feed into our bottom-up tracking estimates have proved resilient to the shock, pushing our tracking estimate back up.

We currently track Euro area GDP growth excluding Ireland at +0.24%qoq. Given the sharp deterioration reported for Q1 (-7.0%qoq non-annualised) and the sequential improvement in some hard indicators, we currently expect Irish growth at +1.1%, resulting in area-wide growth at +0.27%.

Germany In Germany, our tracking estimate moved down in April as survey data and preliminary hard data on March activity, such as the flash manufacturing sales release and the first reading on retail sales, showed marked weakness, thus lowering

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the expected level of activity in Q2. Since then, data for March was revised up and readings on activity in April and May have so far been encouraging, especially in the manufacturing sector.

Across components, we expect a slight moderation in real consumption growth to a soft +0.2%qoq (vs. +0.4% in Q1), supported by still-positive growth in real retail sales despite the drop in real fuel sales. After adverse weather conditions weighed on construction activity in Q1, we expect a +1.8%qoq rebound in construction investment (vs. -2.5% in Q1), consistent with the sharp rise observed in construction production in recent months. Growth in real equipment investment should also move back into positive territory after a -1.2% contraction in Q1, reflecting better data in the capital goods sector. Net trade should have a modestly negative contribution on growth, after meaningfully supporting growth in Q1, reflecting firm goods data but a softer services balance.

On the GVA side, we expect firm growth in construction and industry, reflecting strong data on construction production and manufacturing revenue, but softer growth in the services sector.

On net, we look for an above-consensus +0.16% growth rate (vs. +0.34% in Q1 and consensus at +0.1%).

France In France, weak hard data readings for March and April (together with net negative revisions) pushed down our Q2 tracking estimate. Since mid-June, the dataflow has turned more positive supported by real services turnover and…