Euro Weekly Digest

Europe Economics Date 31 July 2026 Euro Weekly Digest

Resilient domestic demand pushes Q2 GDP growth above trend Michael Kirker Week in review Economist n June money and credit – Strong monthly bank lending continues to support domestic growth Maria Contreras n July flash HICP – Headline HICP rose to 2.9% y/y and core to 2.5%. Some Economist tentative signs of spillover to core goods, but no evidence yet of broad- based spillovers Kuhumita Bhattacharya n Forward-looking wage tracker – stable wage pressures with projections Research Associate extended till Q1-27. No worries about second-round effects n Q2 GDP – EA GDP grew by 0.4% q/q, country data points to resilient Clemente Delucia domestic demand Senior Economist n Confidence surveys – July survey continue to remain positive, though they were largely conducted before recent market tensions intensified.

Week ahead n Final PMIs (Mon, Wed) – Flash release hinted at strong PMIs in the periphery's service sector n June industrial production (Wed-Fri) – IP in Q2 has shown resilience, and the strong Q2 GDP print points to a strong end to the quarter. n June retail sales (Mon, Tue, Thu) – A few more big countries before we get the euro area print on Thursday. Current weighted average pointing to growth n Labour market data (Tue, Thu, Fri) – Data for Spain and France

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31 July 2026 Euro Weekly Digest

Week in review June money and credit data Last week's Bank Lending Survey (BLS) indicated that, despite the signing of the US- Iran MoU, uncertainty continues to negatively impact credit conditions, suggests a potential weakening of lending flows to the real economy. However, current money and credit data have thus far contradicted these expectations, demonstrating robust performance that supports domestic economic activity.

Bank-based lending finished the second quarterly strongly, with monthly bank lending flows in line with the average of the preceding three months (EUR 46 billion). This strength was broad-based, encompassing both household and corporate lending. While household loans remained stable at approximately EUR 17 billion, the household credit impulse was essentially flat at zero for the second consecutive month. Corporate loans, despite a slight dip, maintained a notably high level (EUR 26 billion compared to EUR 34 billion previously), and the corporate credit impulse, remains very strong.

Corporate loans were heavily concentrated in the longer end (5 years+), suggesting that business are continuing to invest despite the uncertainty and cost pressures they are facing because of the war. The robustness of the corporate sector matches the narrative from the recent SAFE survey. The outperformance of the corporate over the houshold sector fits in with the signal we saw in the last Bank Lending Survey (see our recent blog post).

Although the overall credit impulse registered a slight decrease, it continues to exhibit relative strength, significantly exceeding the expectations derived from the BLS credit conditions, which had suggested that geopolitical uncertainty could impede economic growth. The robust bank lending continues to suggest there is scope for the ECB to hike further if they need to.

July flash HICP Euro area headline HICP rose to 2.9% y/y in July from 2.8% in June, in line with consensus and slightly below our forecast. As expected, energy inflation accounted for much of the acceleration (up to 10% from 8.5% in June). Core HICP also increased from 2.4% to 2.5% – in line with DB's forecast, 0.1pp above consensus. The increase was driven mainly by core goods inflation, which rose to 0.9% from 0.7%. Available country data points to broad-based strength across the goods basket. Services inflation edged up only marginally to 3.3% (3.2% prev.), around 15bps below our forecast. Part of our miss is likely explained by airfares. We had anticipated a stronger July rebound as higher fuel costs fed through to ticket prices, but that pass-through appears to be…