Eurozone GDP: Strong headline, steady underlying growth

Eurozone GDP was unexpectedly strong in Q3 at 0.4%, well above our forecast (0.1%). The strength is overstated and again reflects Ireland’s ever-volatile GDP numbers. We had forecast Irish GDP to contract following the 10% surge in Q2, but GDP jumped again by 5.5%. Growth ex-Ireland came in at 0.2%, in line with our expectation for solid underlying growth.

We do not yet have the full details, but piecing things together from individual countries suggests that consumption continued to grow solidly, despite the real income hit from high energy prices, while the external sector performed more poorly. As the RRF wound down in August, growth in Spain (0.6%) was probably helped by a rush to use remaining funds before their expiry. Growth in the Netherlands was unexpectedly strong, driven partly by the AI capex boom, though probably overstated in this quarter by inventory rises (see below) France, in contrast, continues to struggle, recording a -0.1% contraction, following essentially zero growth in H1. We had expected more of a recovery in Q3 given the bottoming out in confidence indicators. Growth is likely to remain weak in France over the coming quarters, given ongoing fiscal tightening and political uncertainty linked to the budget and the upcoming presidential election (see here for more). Italy’s economy also stagnated this quarter, with solid domestic demand offset by poor external demand and industrial weakness.

German growth was steady at 0.2%, above our forecast of 0.1%. The fiscal expansion continued to be the main driver, with government consumption contributing positively. In contrast, exports were weak in Q3, and slowed notably from the strong first half of 2026, while investment remained weak. We expect GDP to continue growing over the coming quarters, though this continues to be driven by fiscal policy, and we see little sign yet of growth developing self-sustaining momentum. Still, we have raised our 2026 growth forecast for Germany slightly to 1.3% from 1.2%.

All told, headline GDP growth in the eurozone is vulnerable to a sharp slowdown and possibly a negative quarter in the near-term, given that recent exceptional strength has been driven by volatile Irish GDP. Underlying growth in contrast has been stable at a 0.2-0.3% pace, and we expect that underlying pace to broadly continue. Indeed, we no longer expect a meaningful pickup in underlying growth next year, thanks to the headwinds from high energy prices and rising interest rates. See our Global Monthly for more.

The Netherlands continued to defy gravity in Q3

The Netherlands once again surprised to the upside in Q3, with GDP expanding by 0.6% q/q, while earlier growth was revised upwards. Exports and consumption supported growth, alongside temporary inventory accumulation. The latter may be related to gas inventories, as stock replenishment seems to have taken place somewhat later than in previous years. The industrial sector continues to perform well, supported by the global AI investment boom, which also supports exports. The strong Q3 reading adds to an already solid first half of the year, leaving the Dutch economy on a stronger footing despite higher inflation and geopolitical uncertainty.