A Temperature Check on Euro Area Growth

Research evidence excerpt

A Temperature Check on Euro Area Growth

Economics Research

23 June 2026 | 6:02PM BST

EUROPEAN ECONOMICS ANALYST

n Following revisions to our commodity strategists’ energy price forecasts, the Giovanni Pierdomenico

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recent easing in financial conditions, and the large Irish-driven downward giovanni.pierdomenico@gs.com

Goldman Sachs International

revision to Q1 GDP growth, we review the incoming data received so far for Q2

and refresh our growth forecast for 2026H2. On net, we revise up modestly

growth in the EMU4 economies but upgrade area-wide growth more

significantly, reflecting payback after the large Irish contraction in Q1.

n The dataflow since late-February has shown meaningful divergence between

activity in the manufacturing and services sectors. After the surprising

manufacturing resilience over March and April, which likely reflected a

temporary impulse from stock-building, we expect industrial activity to soften

slightly over May and June, in line with surveys and higher-frequency indicators.

n Weakness in services has been particularly pronounced in consumer-exposed

subsectors but should pick up modestly as consumer sentiment shows some

signs of recovery. We expect the construction sector to grow at a firmer pace,

partly reflecting likely payback after a weak weather-related Q1.

n Taken together, our country-level Q2 tracking estimates stand at +0.1%qoq in

Germany, France, and Italy, and at +0.4% in Spain, resulting in an EMU4 average

growth rate of just over +0.15%. Incorporating a bounceback in Ireland, we

expect headline area-wide growth at +0.26% in Q2.

n The outlook for 2026H2 looks improved on net as financial conditions have

eased and our oil price forecast was revised down. We thus revise up EMU4