SPF trims euro‑area 2026 growth forecast to 1.0% as energy costs climb

The euro area just got a more annoying problem — weaker growth and hotter inflation at the same time. That is the message from the ECB’s latest Survey of Professional Forecasters, published on May 4. Economists trimmed their 2026 growth outlook and nudged up inflation forecasts, with one obvious culprit in the background: higher energy prices tied to the war in the Middle East. (ecb.europa.eu) ### What changed? The headline move was on growth. Forecasters now see euro-area GDP rising 1.0% in 2026, down from 1.2% in the previous round. They also cut 2027 to 1.3% from 1.4%, while leaving 2028 unchanged at 1.3%. The ECB’s release says the downgrade was mainly driven by the expected negative impact of higher energy prices. (ecb.europa.eu) ### Why do energy prices hit growth so fast? Because energy is a tax on almost everything. When oil and gas get more expensive, households spend more on fuel and utilities and have less left for everything else. Firms get squeezed too — especially manufacturers, transport companies, and any business(ecb.europa.eu)he data. The ECB’s March projections had already warned that the Middle East war was pushing up oil and gas prices and raising uncertainty around the whole outlook. (ecb.europa.eu) ### So inflation got worse too? Yes — especially for 2026. Forecasters now expect headline inflation at 2.7% in 2026, before it falls back to 2.1% in 2027 and 2.0% in 2028. Core inflation, which strips out energy and food, was also revised up and is now seen at 2.2% in both 2026 and 2027. Longer-term inflation expecta(ecb.europa.eu)r-term bump is real. (ecb.europa.eu) ### Why is core inflation a bigger deal? Because it suggests the shock does not stay neatly inside energy bills. If firms face higher transport, packaging, and input costs, some of that leaks into broader prices. The ECB’s survey included a special question on the Middle East(ecb.europa.eu)cally, this is not just a one-month oil spike story. (ecb.europa.eu) ### Is this a recession call? Not really. The survey still points to growth, just slower growth. A 1.0% expansion is weak by normal standards, but it is not contraction. Unemployment expectations were unchanged, which also tells you forecasters are not yet pricing in a labor-(ecb.europa.eu)le. (ecb.europa.eu) ### How does this compare with the ECB’s own view? It is close, but a touch gloomier on growth. The SPF results are broadly in line with the ECB staff’s March 2026 projections for inflation and only slightly lower on growth in 2027 and 2028. So this is not a dramatic break from the central bank’s ba(ecb.europa.eu)ge a bit more aggressively. (ecb.europa.eu) ### Why does this matter for rates? Because this is the awkward version of inflation. If prices were rising because demand was booming, higher rates would be the obvious answer. But when inflation comes from an energy shock while growth weakens, the tradeoff gets uglier. The EC(ecb.europa.eu)s. (ecb.europa.eu) ### Bottom line The new SPF does not say the euro area is falling apart. It says the region is getting squeezed. Growth for 2026 looks softer, inflation looks stickier, and the source of the trouble is a familiar one — expensive energy spilling into everything else. (ecb.europa.eu)