Eurozone GDP growth slows to 0.4% in third quarter, beating forecasts

Investment and consumer spending supported growth

Gross domestic product rose 1.3% from a year earlier, Eurostat said, up from 1.2% in the second quarter and above the 1.1% analysts had expected. Sharecast reported that this was the strongest annual expansion since the second quarter of 2025. Investment in artificial intelligence, defence and infrastructure supported the economy, along with external demand and consumer spending, Reuters reported.

Inflation and borrowing costs cloud the outlook

Price pressures built in France and Spain even as growth stayed uneven, while German state inflation readings offered some relief, InvestingLive reported. According to Reuters estimates cited by Logos Press, accelerating prices in the bloc's largest economies could push headline eurozone inflation to 3.9% or higher, well above the ECB's 2% target. The same report said market participants were increasingly considering a further ECB rate rise as early as December. An ECB survey published on 30 October showed inflation expectations rising and suggested inflation may not return to target until 2028.

Europe's dependence on energy imports means rising oil and gas prices raise business costs, cut margins and lower household purchasing power. Yields on German government bonds, the benchmark for the eurozone, rose in October to their highest in several decades, and French risk premiums widened on public finance concerns, Reuters reported. The labour market has limited second-round effects so far: unemployment stood at 6.5% in August, above the record low of 6.2% at the end of 2024.

Ireland leads, France and Italy lag

Ireland grew 5.5% quarter on quarter, the fastest in the bloc, though Eurostat cautioned that its preliminary estimates were experimental and subject to revision. InvestingLive linked the expansion to multinational-dominated industries, including information and communication and manufacturing.

Spain and the Netherlands each grew 0.6%, and Estonia matched them. Germany, the largest economy, expanded 0.2%, slowing from 0.3% in the second quarter, Destatis figures showed. Italy stagnated at 0.0% and France contracted 0.1%. Lithuania fell 1%, the sharpest contraction in the release, Sharecast reported.

On an annual basis, Spain grew 2.7%, Portugal 2.4% and Lithuania 2.3%, while France was the weakest with a 0.1% contraction and Austria and Belgium grew 0.6% and 0.7%. Ireland's annual growth was 3.6%. Destatis said German household consumption rose slightly in the third quarter, although investment declined and export growth slowed noticeably from the first half of the year. Germany's annual GDP rose 1.2% after adjusting for price and calendar effects, up from 1% in the previous quarter.

What happens next

Eurostat will publish a second estimate for the third quarter on 13 November 2026, followed by a more comprehensive release in early December. Until then, the 0.4% quarterly figure is provisional and may be revised.