European Daily A More Mixed Q3 Activity Picture After a Firm Q2

Economics Research 7 September 2026 | 2:11PM BST

European Daily: A More Mixed Q3 Activity Picture After a Firm Q2

n Real activity in the Euro area surprised significantly to the upside in Q2, with Giovanni Pierdomenico | headline growth revised up to +0.6%qoq (vs. +0.4% previously reported) owing Goldman Sachs International to an upward revision to Irish figures. Excluding volatile Ireland, we estimate growth stood at a firm +0.3% last quarter (unrevised), supported by consumption growth and resilient foreign demand. n The data received so far for Q3, however, has been more mixed. While soft data has continued to recover in the first two months of Q3, the consumer is under renewed pressure as energy product prices grind higher. Early hard data points to a slight moderation in consumer activity, most notably in Germany. Early German industrial data for July has also looked mixed, with firm headline orders on the back of defence-related procurement but softer real sales and production data. n Based on the still-limited data available, we currently track Q3 area-wide growth at +0.17%qoq (and at +0.18% excluding Ireland), a still-healthy pace of expansion albeit slightly lower than observed in H1. Across countries, our nowcasting model points to flat growth in Germany in Q3 after a strong H1 but positive growth in France (+0.15%), Italy (+0.17%), and Spain (+0.56%). n Looking beyond Q3 and into the winter, we see two-sided risks around our growth forecasts, which currently stand at +0.2%qoq in Q4 and at +0.3%qoq on average in H1 2027. To the upside, the periphery could continue to outperform our expectations for a modest slowdown in growth. To the downside, commodity prices could prove stickier than implied by our commodity strategists’ modal forecast. While households absorbed the initial inflation shock by dissaving, a further erosion of real incomes could dent spending into the winter.

A More Mixed Q3 Activity Picture After a Firm Q2

After a surprisingly firm Q2, the Euro area activity dataset has been more mixed at the start of Q3 as surveys continue to recover from Q2 lows but hard data shows some signs of softening in July, most notably in Germany. In this Daily, we review the incoming dataflow, launch our detailed GDP tracking estimate for Q3, and review the risks to growth into the winter.

On net, we continue to see the Euro area economy as broadly resilient to elevated energy prices and headwinds from extreme weather events, but we do expect a moderation of the growth momentum in Q3. Excluding volatile Irish figures, our

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tracking points to +0.18%qoq growth in Q3, a still-healthy pace of expansion albeit slightly lower than observed in H1 (on average +0.3%).

A More Mixed Dataset in Early Q3 After a Surprisingly Firm Q2 The national account details suggest that the underlying growth momentum was firm in Q2 even after discounting the +10.2%qoq rebound in Irish GDP (revised up from the +3.9% originally reported). In the third release, area-wide growth was upgraded to 0.6%qoq due to the Irish revision, while ex-Ireland growth was essentially unchanged at +0.3% as revisions in Germany (+0.10pp to +0.33%) and France (-0.12pp to +0.04%) broadly offset each other. Real GDP growth was supported by firm consumption growth, which more than offset a modest drag from declining real investment, and resilient foreign demand (Exhibit 1, left).

Exhibit 1: Firm GDP Q2 Details; Ongoing Recovery in Soft Activity Indicators

Source: Eurostat, S&P Global Market Intelligence, European Commission, Haver Analytics, Goldman Sachs Global Investment Research

The data received so far for Q3, however, has been more mixed.

Soft data has continued to recover in the first two months of Q3 and, on net, stands close to pre-conflict levels. Across sectors, manufacturing survey data has been particularly encouraging in Q3 and retail indicators have also risen. Survey indicators of spot activity in the services sectors have lagged slightly behind but have nonetheless unwound…