S&P Global Raised 2026 European Growth Forecasts
Stronger consumer demand has prompted higher projections despite persistent inflationary pressure.
Updated on Sept. 25, 2026 in Economic Indicators
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S&P Global Ratings has increased its 2026 growth outlook for the eurozone and UK following stronger-than-expected consumer demand in the second quarter. While growth has held steady, the agency cautioned that elevated inflation and interest rates continue to create significant economic headwinds for operators.
Why it matters
The upward revision highlights a shift where resilient consumer spending, supported by drawdowns in savings, has offset recent purchasing power declines. For business leaders, this signals a need to balance cautious supply planning against an environment where consumer confidence remains unexpectedly buoyant.
S&P Global projects 2026 GDP growth at 0.9% for the eurozone and 1.3% for the UK, supported by a 6 percentage point increase in net financial wealth over the last 12 months. This growth materialized despite Q2 2026 purchasing power falling 0.5 percentage points.
The players
S&P Global Ratings
A major credit rating agency that provides independent research and analytics on global financial markets.
European Central Bank
The central banking institution responsible for monetary policy across the eurozone member states.
Bank of England
The central bank of the United Kingdom, responsible for setting interest rates and managing monetary stability.
The details
Consumer spending resilience has been driven by a combination of recovering confidence and the utilization of accumulated savings, even as real purchasing power has dipped. However, operating environments remain pressured by central bank policy, with deposit facility rates expected to reach 2.75% by December. Companies must now navigate a landscape where retail sales declined 0.6% in the eurozone and 0.9% in the UK during July 2026, suggesting that future growth remains vulnerable to cost-push inflation.
Timeline
Eurozone GDP grew 0.6% during Q2 2026.
Eurozone retail sales fell 0.6% in July 2026.
The Bank of England is expected to raise interest rates in November 2026.
The European Central Bank is expected to hike rates in December 2026.
Currency recovery to 1.20 EUR/USD is projected by 2028.
Market Landscape
This growth forecast follows the established pattern of economic recalibration required by the European Central Bank's inflation-targeting mandate. It marks a departure from earlier, more pessimistic outlooks that failed to account for the sustained wealth-effect spending observed through the second quarter.
Operators should prepare for sustained elevated interest rates, as European central banks move toward terminal rate targets by year-end. Maintain tight control on inventory and margin management to account for anticipated energy price volatility in Q4.
The takeaway
While consumer resilience is currently propping up growth, the transition to higher-for-longer interest rates in late 2026 suggests narrowing margins for businesses dependent on discretionary spending. Monitor upcoming central bank interest rate decisions in November and December to adjust cost-of-capital assumptions.
Further reading
For more information on regional economic trends, visit Economic Indicators.
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