Eurozone GDP is on pace for just 0.9% growth in 2026, with resilient household spending—funded by drawing down savings—offsetting weak private demand and tighter policy.

Despite elevated energy prices, geopolitical tensions and tighter monetary policy, the European economy has kept growing this year, with GDP on pace for a 0.9% gain in 2026, according to AllianceBernstein forecasts. But the underlying trends are far from encouraging: private demand remains subdued, and trade-related factors have accounted for a significant share of the region's positive performance.

Consumers have been the critical swing factor. European households increased consumption by 0.4% in the second quarter even as energy bills rose, adding 20 basis points to GDP growth. However, they have funded much of that spending by saving less—particularly in Spain and Italy—and surveys show saving intentions rising over the next 12 months, a sign of downbeat sentiment.