The European Central Bank has published an analysis finding that economic policy uncertainty shocks subtracted about 0.4 percentage points from euro area real GDP growth between the first quarter of 2025 and the first quarter of 2026. The impact came mainly through weaker business investment and, to a lesser extent, private consumption. Persistently high geopolitical and trade policy uncertainty is expected to continue weighing on activity through the rest of 2026. The ECB’s main model indicates that a one standard deviation uncertainty shock reduces business investment by 1.2% and private consumption by 0.4% at their troughs, with the strongest effects after about three quarters. A complementary model produces larger estimates, including a roughly 1% decline in real GDP and a 2% contraction in business investment. Tangible investment is more sensitive than intangible investment, while durable goods spending falls sharply but recovers faster than spending on services.
European Central Bank2026-08-05
European Central Bank finds uncertainty cut euro area GDP growth by 0.4 percentage points, expects drag through 2026
The European Central Bank estimates that uncertainty shocks cut euro area real GDP growth by about 0.4 percentage points between the first quarter of 2025 and the first quarter of 2026. Business investment bears the largest impact, while private consumption is affected to a lesser extent. Elevated geopolitical and trade policy uncertainty is expected to weigh on activity through the rest of 2026.