Our nowcasts for France, Eurozone and the United States.
Solid growth in Q1 2026. According to our nowcast, growth is expected to strengthen in the Eurozone (+0.4% q/q, after +0.2% in Q4) and in France (+0.3% q/q, after +0.2% in Q4), driven by a positive momentum despite the energy shock that began in March. In the United States, the rebound suggested by the GDP Now (+0.3% q/q, after +0.1% in Q4) is underestimated. This is because this indicator does not take into account the favourable post-shutdown effect (which our forecast of 0.9% q/q, non-annualised, does). In the other major Eurozone economies, growth is expected to have remained broadly stable: in Germany and Italy, the pace is expected to remain close to Q4 2025 levels (+0.3% q/q), thanks to public demand (investment and consumption)
Activity indices are holding up, but household confidence is eroding. Business sentiment indicators did not falter in March, and prospects of price rises are confined to a few sectors (oil and chemicals). The downturn is, at this stage, less pronounced in services and construction. Household confidence is deteriorating more noticeably against a backdrop of significantly rising inflation expectations and gloomier prospects for economic activity and unemployment.
The energy shock has mainly resulted in precautionary behaviour on the part of firms, which increased their inventories in March. This reflects the sharp rise in input costs (which are still below their 2022 levels, however). In the short term, the build-up of corporate inventories (prior to the acceleration in inflation) has supported production. The rise in energy prices does not appear, at this stage, to have affected household spending behaviour.
The impact of the energy price shock has been limited so far. Expected price indices rebounded only slightly in March, across all sectors (a very different situation to 2022). For the time being, this shock does not involve any major supply constraints. Output is likely to be more severely affected by falling demand as the issue of purchasing power resurfaces. Although this is a concern for households, they have not yet scaled back their spending intentions.
Business sentiment remains solid for the time being, despite the energy shock. Above all, companies are reporting, above all, a rise in input costs, which is expected to lead to higher prices for goods sold in the coming months. Output remains buoyant, in both industry and services. However, household confidence is deteriorating significantly, driven by sharply rising inflation expectations.
Surveys suggest a healthy level of activity in Q1 but are already showing signs of deterioration from Q2 onwards. Business sentiment indicators were fairly positive at the start of 2026. However, they now point to a downturn, with a resurgence of supply constraints and an expected deterioration in demand (from both businesses and households). The manufacturing output index is contracting for the first time in six months.?
Business sentiment surveys point to a healthy economy, despite the energy shock. In March, business sentiment (ISM PMI) remained in expansion territory in both the manufacturing (which hit a four-year high) and non-manufacturing sectors, but supplier delivery times extended and, above all, input-price growth accelerated (and stood at a high not seen since 2022). By contrast, consumer sentiment (Michigan) has dipped sharply. Expectations deteriorated, particularly around 1-year inflation.
The economy was in good health before the energy shock. Business sentiment (PMI) reached a high not seen since 2013 in Q1 2026, but March data pointed to a slowdown. New household concerns were evident that same month in the decline in consumer confidence (following a post-COVID high in February), which was widespread across its sub-components (overall livelihood, willingness to buy durable goods). This brought an end to an upward trend spanning several months.
Economic growth accelerated in Q1, driven by the export-oriented manufacturing sector. The improvement in the business climate within the industry had signalled a strengthening of activity. Industrial production growth reached 6.1% year-on-year in Q1, vs. 5.0% in Q4 2025, supported by a sharp rise in exports – particularly of electronic goods. This momentum contributed to a slight recovery in investment in Q1. Growth in services, meanwhile, slowed from 5.6% y/y in Q4 2025 to 5.0% in Q1 2026. The rebound in retail sales observed in January–February did not last, due in particular to the waning impact of government subsidy schemes. The consumer confidence index has been recovering slowly for several months, but remains very low
Despite the war and energy shocks unfolding in parallel to the Meetings, finance officials, central bankers and other delegates took the situation with a poise that contrasted with the sense of shock that followed Liberation Day. Unable to predict with any degree of confidence how the war would evolve, and hence how large the economic damage would be, delegates focused more than usual on what lies beyond the near-term outlook: regime changes in geopolitics, economics and markets; how to explain and preserve recent resilience; and the multiple ongoing re-wirings of the fabric of the global economy and financial markets. Here are some personal key takeaways.
The latest economic news.
Equity indices, Currencies & commodities, and Bond markets.
We have selected a set of indicators to track the impact of this new energy shock, caused by the war in the Middle East, on activity and prices in the Eurozone, the United States, oil and gas markets and emerging countries, and to see how much the current situation resembles the situation in 2022 at the outbreak of the conflict in Ukraine.This dashboard featuring graphs and comments will be updated on a monthly basis for as long as necessary.
The assessment of the available data to date is relatively positive, as the immediate reaction of confidence surveys and inflation was limited and the overall developments were less unfavourable in March 2026 than in March 2022. This is good news, but it does not prejudge what will happen next at all. It is likely that the deterioration observed will continue: the question is by how much.
The Iran war delivered a quick, though relatively contained, negative impact to US activity data and surveys.By March, CPI inflation recorded its largest monthly increase since 2022 and reached +3.3% y/y (+0.9 pp) –almost entirely on the back of gasoline prices, with the non-energy index remaining virtually stable.
In March 2026, the inflationary impact of the surge in oil and gas prices remained moderate, both in absolute terms with an average inflation rate for the main emerging countries of 4.3% compared to 3.9% in February, and relative to 2022. The absence of contagion to agricultural and food prices is the main explanation. Manufacturers' opinion on input prices is, moreover, less degraded than in 2022. However, a catch-up should occur with the expected release of the rise in fertilizer and petroleum-derived input prices to all prices.
The energy shock implied by the war in the Middle East has, for now, induced stronger reaction in oil and European gas spot prices than those observed following Russia's invasion of Ukraine.
Latin America is considerably less exposed than other emerging regions to the repercussions of the war in the Middle East. This is mainly due to its very low risk of hydrocarbon supply disruptions: the vast majority of imported hydrocarbons come from the United States and other countries in the region, with only a negligible portion coming from the Middle East. Furthermore, several countries are net exporters (Argentina, Brazil, Colombia and Ecuador).
This week, Washington DC will host two gatherings that should be important in their own right, and yet are unlikely to be: one is the Spring Meetings of the International Monetary Fund (IMF) and World Bank (WB), which brings into town thousands of top finance and central banking officials as well as private sector delegates from the financial sector and civil society; the other is the peace negotiations between Israel and Lebanon. The former is traditionally an opportunity to take stock and send a combination of reassuring messages to markets and stern admonitions to policymakers. The latter could have been history-making just for taking place. Yet both are certain to be overshadowed by developments in the Persian Gulf and US-Iran talks
Will a different situation lead to different outcomes? In other words, will the combination of weaker demand and more moderate supply constraints in 2026, as compared to 2022, help to limit the rise in inflation? Having illustrated the impact of the energy shock caused by the war in the Middle East on six key variables in the Eurozone in our previous Chart of the Week, we now move on to a new comparison between these two dates, this time focusing on the relative levels of supply and demand issues. In the Eurozone, weaker demand has resulted in a more pronounced decline in inflation, unlike in the United States, where both demand and inflation have remained more sustained
The war in the Middle East has caused significant disruptions in the market for refined petroleum products, affecting not only Asia but also Europe. For the time being, the situation in Europe remains under control, largely thanks to stock levels that provide visibility for around one month. Nevertheless, Europe’s dual reliance on suppliers in the Gulf and Asia calls for caution. Supply status in the European market will be influenced by geopolitical developments in the Gulf and whether Asian producers choose to prioritise supplying their domestic markets.
