S&P Global Raised 2026 European Growth Forecasts
Stronger consumer demand has prompted analysts to revise growth outlooks despite ongoing inflationary pressures.
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 better-than-expected consumer demand. This shift follows second-quarter data showing growth in both the Eurozone and the UK.
Why it matters
The upward revision highlights a tension between resilient consumer spending and persistent economic hurdles like inflation and high interest rates. While households are currently drawing on savings to maintain activity, future financial planning remains complicated by these pressures.
Eurozone GDP grew 0.6 per cent and UK GDP rose 0.4 per cent in the second quarter of 2026. Despite this, real household purchasing power fell 0.5 percentage points as retail sales declined in July.
The players
S&P Global Ratings
A credit rating agency that provides independent research and benchmarks on the creditworthiness of borrowers and economic outlooks.
European Central Bank
The central bank responsible for monetary policy in the Eurozone, which influences consumer interest rates and inflation.
Bank of England
The central bank of the UK that sets interest rates to manage inflation and support national economic stability.
The details
Consumers have sustained spending by tapping into personal savings, bolstered by recovered confidence and increased net financial wealth. However, the report cautions that inflationary headwinds and rising energy costs continue to challenge household budgets. These factors are expected to influence central bank decisions as rates are projected to climb toward 2.75 per cent by year-end.
Timeline
Eurozone GDP grew 0.6 per cent during Q2 2026.
Eurozone retail sales fell 0.6 per cent in July 2026.
Bank of England interest rate action is anticipated in November 2026.
European Central Bank interest rate hikes are expected in December 2026.
Currency recovery to 1.20 EUR/USD is projected for 2028.
Money Landscape
This growth forecast update reflects a fragile period of economic recovery across the region. It remains tightly linked to the path of the European Central Bank deposit facility rate, which is currently shaping the cost of borrowing for households.
Higher interest rate expectations suggest that borrowing costs for mortgages or consumer credit may remain elevated through the end of the year. Households should consider reviewing their debt obligations and savings buffers with a qualified financial professional to prepare for these conditions.
The takeaway
While growth projections have ticked upward, household purchasing power remains under pressure from inflation. Consider auditing your household budget to account for potential interest rate changes and sustained energy cost volatility through the final quarter of 2026.
Further reading
For broader trends affecting your household budget, see our Economic Indicators section.
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