S&P Global Raised Economic Growth Forecasts for Europe
Stronger consumer demand prompted the agency to lift its 2026 growth outlook for the eurozone and UK.
Updated on Sept. 25, 2026 in Economic Indicators
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S&P Global Ratings has increased its 2026 economic growth projections for Europe, citing resilient consumer demand as a key factor. While growth figures outperformed initial expectations, the agency warned that persistent inflation and high interest rates continue to create financial pressure.
Why it matters
The upward revision reflects a surprisingly robust performance in consumer spending, which has bolstered economic resilience despite rising costs. Analysts noted that households have supported this trend by drawing down savings to combat inflationary headwinds.
S&P Global projects 2026 GDP growth of 0.9 per cent for the eurozone and 1.3 per cent for the UK. However, real household purchasing power fell 0.5 percentage points in Q2 2026, and retail sales declined by 0.6 per cent in the eurozone and 0.9 per cent in the UK during July.
The players
S&P Global Ratings
This is a global provider of credit ratings and research that monitors financial stability and macroeconomic performance for institutional and retail investors.
European Central Bank
This institution is the central bank for the eurozone countries and is responsible for managing monetary policy and regional inflation targets.
Bank of England
This organization serves as the central bank for the United Kingdom and is tasked with maintaining monetary stability and regulating interest rates.
The details
European markets maintained resilience through wealth effects and recovering consumer confidence, even as Irish domestic demand experienced a 0.8 per cent contraction in the second quarter. While consumption remains a driver of growth, the agency flagged that gas prices are expected to rise by 20 per cent in the final quarter of 2026.
Timeline
Q2 2026: Eurozone GDP rose 0.6 per cent and UK GDP grew 0.4 per cent.
July 2026: Eurozone retail sales fell 0.6 per cent and UK retail sales fell 0.9 per cent.
November 2026: Bank of England is expected to raise interest rates.
December 2026: European Central Bank is projected to hike rates to 2.75 per cent.
2028: Currency recovery is projected to reach 1.20 EUR/USD.
Macro View
Current growth forecasts follow a pattern set by the European Central Bank deposit facility rate thresholds, which influence regional borrowing costs. This trajectory mirrors historical efforts to balance inflationary control with the need for sustainable, long-term GDP expansion.
Rising interest rate expectations could lead to higher costs for personal loans and mortgages as central banks continue their inflation-targeting efforts. Additionally, continued retail sales declines and inflationary pressures suggest that household budgets will remain tight for the remainder of the year.
The takeaway
Consumers have largely propped up the economy by spending down savings to offset high energy and living costs. Monitoring energy price fluctuations in the final quarter will be vital for assessing whether this consumer-led resilience remains sustainable heading into next year.
Further reading
For more analysis on regional performance, visit the /economics/economic-indicators/ section.
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