Euro area: Lower price pressure means stronger growth

Research evidence excerpt

Euro area: Lower price pressure means stronger growth

J P M O R G A N Europe Economic Research

02 July 2026

Euro area: Lower price pressure

means stronger growth

• Lower Brent price prompts Euro area growth upward revision Economic and Policy Research

• 3Q forecast unchanged at 1% ar, as consumer spending rebound likely to be Raphael Brun-Aguerre

slow (33-1) 8703 2409

raphael.x.brun-aguerre@jpmorgan.com

• We now expect stronger growth (1.5% ar) over 4Q26-2Q27 Mariana Monteiro

(44 20) 3493-5147

The price of Brent has fallen significantly in recent weeks. Brent prices peaked in mariana.reispaivamonteiro@jpmorgan.com

early April, breaking the $120 mark, before hovering around $110 dollars a barrel.

Greg Fuzesi

Since late May, Brent has been trending down, a move amplified by the (44-20) 7134-8310

announcement of a deal between the US and Iran mid-June. Brent is now trading greg.x.fuzesi@jpmorgan.com

around $70, in line with the February average. J.P. Morgan Securities plc

These dynamics have already prompted us to revise down our Euro area inflation

forecast. Euro area headline inflation peaked at 3.2%oya in May and we expect

inflation to average 2.9%oya in 2H26, before falling significantly during 2027.

The HICP data do not show much sign of energy pass-through to core prices, but

they do show pre-war stickiness and fading drags from tech prices. We nonetheless

expect modest energy-related inflationary pressures to materialize with a lag,

leaving core inflation hovering around 2.5%oya over 4Q26-1Q27, before

declining gradually towards 2.2%oya by 4Q27.

Regarding growth, we revised up our 2Q GDP tracking already last week, from

0.25% ar to 0.5% ar, as household spending data overall have been firmer than we

had expected.