General Assets
Economy

The euro-area economy in the third quarter of 2026

Published Reading time approx. 12 minutes By General Assets Research Group

The third quarter turned on energy. Higher oil and gas prices, which the European Central Bank attributes to the Middle East conflict, pushed euro-area inflation to 3.8% in September, and the ECB raised its interest rates for the second time in three months. At the same time, business surveys reached their strongest levels in years, and Germany's budget began turning its defence and infrastructure plans into spending. This report sets out what the official data show, at the dates given, and how the ECB describes the risks.

Key takeaways

  • Inflation rose to 3.8% in September (flash estimate) from 3.2% in August. Energy prices were 18.8% higher than a year earlier; core inflation was 2.5%.
  • The ECB raised its deposit rate to 2.25% in June and to 2.50% in September, unanimously, and says it is not pre-committing to a rate path. Its next decision is on 29 October.
  • GDP grew 0.6% in the second quarter, revised up because of Ireland. Among the four largest economies, growth ranged from 0.0% in France to 0.7% in Spain. Business surveys in September were the strongest in nearly three and a half years.
  • Germany's 2026 budget provides EUR 100.9 billion for defence and security, EUR 57.6 billion of it outside the debt brake. Military procurement spending from January to August was 46.2% higher than a year earlier.
  • The ECB sees the risks to inflation as tilted upwards and the risks to growth downwards, mainly because of energy supply and geopolitics.

Inflation: an energy shock

Euro-area consumer prices, measured by the harmonised index of consumer prices (HICP), were 3.8% higher in September than a year earlier, according to Eurostat's flash estimate of 2 October. In August the rate was 3.2%. About three quarters of the increase came from energy; services and food added the rest.

Annual rates of change. Source: Eurostat, flash estimate of 2 October 2026 and final August data of 17 September 2026. Full September data are due on 16 October 2026.
HICP componentAugust 2026September 2026 (flash)
All items3.2%3.8%
Energy14.3%18.8%
Services3.0%3.2%
Food, alcohol and tobacco1.1%1.4%
Non-energy industrial goods1.2%1.1%
Core (excluding energy, food, alcohol and tobacco)2.4%2.5%

Two points stand out. First, core inflation, which leaves out energy, food, alcohol and tobacco, moved only from 2.4% to 2.5%: so far the energy shock has not spread widely to other prices. Second, the September figure is already above the peak of 3.6% that ECB staff projected for the fourth quarter in September, on energy-price assumptions fixed on 19 August.

Flash estimates are revised. August's was: the flash of 1 September showed 3.3%, the final figure of 17 September 3.2%. The September figure may change too.

The full report

For subscribers

The full report continues with 7 more sections, with all tables and the data behind them as CSV files for Excel. It is part of the General Assets Research Group subscription:

  • The ECB: two rate rises in three months
  • Growth: stronger surveys, uneven output
  • Germany's fiscal turn
  • The United Kingdom and Switzerland
  • The risks, in the ECB's words
  • Dates to watch
  • In summary

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Sources

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  5. ECB, key ECB interest rates. ECB
  6. ECB, monetary policy decisions of 11 June, 23 July and 10 September 2026. June; July; September
  7. ECB, monetary policy statement, 10 September 2026. ECB
  8. ECB, account of the monetary policy meeting of 9 and 10 September 2026 (8 October 2026). ECB
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  10. ECB, meeting calendar of the Governing Council. ECB
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  14. INE, quarterly national accounts, second quarter of 2026 (25 September 2026). INE
  15. S&P Global and HCOB, eurozone manufacturing PMI (1 October 2026) and composite PMI (5 October 2026), September 2026, as reported by Reuters and Trading Economics. Reuters, via The Standard; Trading Economics
  16. German Federal Ministry of Finance, monthly reports of April 2025 (financing package), February 2026 (2026 budget) and September 2026 (federal finances and borrowing). April 2025; February 2026; September 2026, budget; September 2026, borrowing
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