The euro zone economy grew faster than expected in the third quarter, defying another round of gloomy forecasts and showing surprising resilience in the face of expensive energy.
Eurostat’s preliminary figures, published on Friday, showed gross domestic product across the 21 countries sharing the euro rose 0.4% on the quarter. That was a slowdown from an exceptionally strong 0.6% in the second quarter, but double the 0.2% increase expected in a Reuters poll of economists.
Compared with a year earlier, the bloc’s economy expanded by 1.3%, above the 1.1% forecast and broadly in line with its potential — the pace it can sustain without extra stimulus.
The headline figure hid a sharply uneven picture among the bloc’s biggest economies. Germany, the largest, grew by just 0.2% on the quarter, while Spain and the Netherlands each expanded by 0.6%. Italy was unchanged, and France contracted by 0.1%.
The resilience has surprised forecasters repeatedly this year. Heavy spending on artificial intelligence, defence and infrastructure has boosted investment, robust foreign demand has helped industry, and households have kept spending, drawing down savings rates that were already high.
Europe’s performance looks less impressive set against the United States, whose growth rate is more than double the euro zone’s. As a net energy importer, the bloc feels oil price surges immediately, through squeezed company margins and worsening terms of trade — which is why forecasts made after the start of the Iran war earlier this year were so pessimistic. A string of upgrades through the year now points to growth above 1% for 2026 as a whole, with an acceleration expected in 2027.
One caution applies to the headline number itself. Ireland’s economy grew by an exceptional 5.5% in the quarter, large enough to lift the euro zone figure materially. Irish GDP is prone to sharp swings because of the large multinational firms, particularly in pharmaceuticals, located there for tax reasons, so the bloc-wide figure flatters the underlying picture somewhat.
The outlook, the European Central Bank warns, is cloudier than the third-quarter data suggest. Borrowing costs have risen sharply around the world over the past two months, which will slow growth at home and abroad, and a renewed surge in energy costs — with natural gas prices at their highest since the start of Russia’s war in Ukraine in early 2022 — could dampen output and household confidence alike. That combination may force the ECB to raise interest rates again, possibly as soon as December, which would slow growth further.
Note on sourcing: the figures are Eurostat’s preliminary flash estimate and are subject to revision as more complete data arrive; the Irish estimate in particular should be read with care.
Sources: Reuters, “Euro zone growth beats projections again”, https://www.reuters.com/world/europe/euro-zone-growth-beats-projections-again-2026-10-30/ ; Eurostat preliminary flash estimate for third-quarter 2026 GDP, as reported by Reuters.
