Euro area: Revising growth slightly up on firm July PMI

Research evidence excerpt

J P M O R G A N

Europe Economic Research

05 August 2026

Euro area: Revising growth

slightly up on firm July PMI

PMI rise points to 1.4%ar growth; we revise our 3Q forecast to 1.25%ar

Economic and Policy Research

Broad-based improvement in activity across sectors and region

Mariana Monteiro

Inflation indicators remained elevated, but did not show an impact from

renewed increases in energy prices

(44 20) 3493-5147

J.P. Morgan Securities plc

The final July composite PMI was broadly unchanged from the flash estimate,

rising 2pts from June despite renewed geopolitical tensions and higher energy

prices over the month. The reading is consistent with ex‑Ireland growth running at

roughly 1.4%ar, suggesting 2Q (1.2%ar) unanticipated momentum may have even

strengthened further at the margin. The fact that the rise was broad across countries

and sectors provides additional assurance around the region’s outlook. As a result,

we are marking up our 3Q growth forecast for the region by 0.25%-pt to 1.25%ar,

with risks skewed to the upside. As a result, our Q3 Euro area forecast remains well

above the ECB’s 0.5%ar (based on Ireland’s modified domestic demand measure).

The revision embeds a slightly faster recovery in household spending, which we

believe proved resilient in Q2. At the country-level, most of the upgrade is

attributable to Spain, where we raise our Q3 forecast by 1%-pt to 3%ar. We also

make smaller +0.25%-pt revisions to Italy and France, to 0.75%ar, while leaving

Germany unchanged at 1.25%ar (see table below).

July’s PMI improvement was driven by services: the business activity index rose

2.2pts to 51.7, consistent with growth around 1.1%ar. The rebound has coincided

with firmer consumer sentiment, which appears to be supporting demand for

consumer‑facing services. But there are also signs of improvement in business

services, e.g. tech and financials. Meanwhile, manufacturing continued to

improve, partly supported by defense and infrastructure (incl. tech) spending: the

output index rose 1.2pts to 52.9, its highest level since the start of the war in

Ukraine, and is consistent with industrial production growth of roughly 1.2%ar.

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