February 2, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Hi, everyone. This is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of TrendsTalk. We at ITR, you’re a political and unbiased source of economic intelligence. And today I wanted to discuss the European economy.

As we sit here today, the most recent data point for Western Europe was a minus 0.8% year-over-year growth rate. So that is highlighting that we are in the recovery phase for Western Europe. So despite the growth rate being negative, it’s at least getting less negative. By the end of 2026, we expect that growth rate to turn from a minus 0.8% to a positive 1.2% for Western Europe. So we do have growth out there for Western Europe, but that growth is likely going to be more and more concentrated in the second half of the year.

Now, Eastern Europe, on the other hand, is actually flat. The annual growth rate for Eastern Europe industrial production is 0.0%. And we expect that growth rate to improve to a positive 3.5%. So there is more growth in Eastern Europe just from a growth rate perspective compared to the growth rate that we see in Western Europe for 2026. I do want to highlight that both of these series are referencing volume. So this is not an inflation driven series, we’re really just looking at volumes. And I hope that even though folks might want more attractive growth rates, higher growth rates in 2026, it still does show that we’re expecting volume increases and increase in industrial demand in Europe in 2026.

Now, let’s talk a little bit about business confidence on a more granular level. We look at the business confidence indexes because they often serve as great leading indicators to the various countries, regions around the world, from, you know, again, a leading indicator standpoint in economic signal for us. I’m looking at Spain, Portugal, Germany, Italy, Austria and France. Every single one of those business confidence indexes on a 1 over 12, a 1/12 or month-over-month growth rate is positive. That is a big change from where these confidence indexes were in ’23, ’24 and even most of ’25 in which these business confidence indices were all negative. So it’s very exciting to see that confidence is growing really across the board in Europe.

I highlight another set of countries, Finland, Belgium, Denmark, Hungary, the Netherlands and Poland. All of those business confidence numbers are positive as well, except for the Denmark number. The Denmark number is at minus 3.6%, that business confidence index did decline and start to decline late in ’25, and it is the only negative business confidence index out of all these countries I’ve highlighted so far. As many of you can imagine, there’s likely a impact with how the current administration is approaching the topic of Greenland there. Again, we’re apolitical here at ITR. I’m just showing you the data and that’s all I’ll continue to do. I’ll leave the politics up to you, but I think it’s pretty clear to say there’s probably some sentiment in there around Greenland that’s weighing on Denmark. But again, I wanted to zoom out and look at the whole picture, which is growth in Eastern Europe in ’26, growth in Western Europe in ’26, and the vast majority of these business confidence numbers being positive here today is a positive story for all of Europe as we move forward.

Now, I did want to highlight a challenge that the economy in the European Union will continue to face, which is inflation. If you look at the 1/12, again, the month over month CPI numbers out of Europe, that is sitting at 2.4%. That is slightly lower than the 2.7% annual growth rate that we see here in the US, but still inflation above 2%. Now, what’s interesting about the European economy compared to what we see here in the US is that the Producer Price Index, which really represents business inflation, producer inflation, is actually still slightly negative at minus 0.3% compared to the positive single digit numbers that we see here in the US. Might be a little bit more challenging for our friends on the European side to be raising prices and protecting their margins with a negative PPI number like that. But again, as the economies heat up, Western and Eastern Europe industrial production, it’s likely that you see these inflation benchmarks climb ever so slightly to where that PPI is positive for Europe’s economy. So there are slightly different dynamics happening across the Atlantic Ocean compared to what we’re seeing here in the US. But it’s still a positive story in Europe as we look at 2026 growth numbers, but our European friends are going to have to be laser focused on margins just like we are here in the US because this growth cycle is not the abundant growth cycles that the European economy has experienced in the past. And that makes growing margins even more challenging.

Our database is very vast when it comes to these global economic indicators. So please let me, the team at ITR, know how we can help as you’re looking at forecasting your overseas business. We’ve got a lot of great data here, and given the world that we find ourselves in today, I know there’s a lot of uncertainty surrounding it. So there’s still a positive, but again, that margin is really what we’re focused most on, not just here in the US, but also across the pond. So thanks so much for joining me on this episode of TrendsTalk. Continue to keep you updated on the global economy as these geopolitical tensions evolve. But for now, I sure hope you found this information helpful. Please like and subscribe to TrendsTalk wherever you listen to your podcasts. I look forward to seeing you all in the next one. Thanks so much. Take care for now.