Business sentiment and employment expectations improved across the European Union in August, offering policymakers a cautious sign of resilience despite weak growth and persistent uncertainty.
Europe entered September with a modest improvement in economic confidence, as businesses and consumers showed tentative signs of becoming less pessimistic about the outlook.
The European Commission’s latest business and consumer survey showed that its Economic Sentiment Indicator rose in August by 1.0 point across the European Union to 98.2 and by 1.3 points in the euro area to 98.4. Employment expectations also strengthened, bringing both indicators closer to their long-term average of 100.
The figures do not signal a dramatic economic acceleration. Instead, they suggest that Europe may be entering a period of greater stability after months of pressure from sluggish growth, geopolitical uncertainty, trade tensions and the lingering effects of higher borrowing costs.
Consumer attitudes remain more subdued. The European Commission’s flash estimate for August placed consumer confidence at -15.0 in the EU and -15.5 in the euro area — still significantly below historical norms even after a slight monthly improvement.
Inflation expectations, however, are moving in a direction likely to reassure policymakers. The European Central Bank’s July Consumer Expectations Survey showed median expectations for inflation over the following 12 months falling from 3.0% to 2.9%. Expectations three years ahead also eased from 2.8% to 2.7%, while the five-year measure remained unchanged at 2.4%.
That gradual moderation is important for the ECB, whose Governing Council has kept interest rates unchanged while emphasizing its determination to return inflation sustainably to its 2% medium-term target. Accounts of the July monetary policy meeting showed that officials regarded the outlook as broadly stable but continued to stress unusually high uncertainty.
Europe’s broader growth picture nevertheless remains fragile. The European Commission’s spring projections put euro-area growth for 2026 at just 0.9%, while demographic constraints, weak productivity gains and an unsettled international trade environment continue to limit the region’s expansion potential.
For businesses, the latest confidence readings offer something short of a recovery but more than stagnation. Improving employment expectations suggest companies have not moved decisively toward retrenchment, while easing inflation pressures could gradually strengthen household purchasing power.
The coming months will determine whether August represents the beginning of a more durable improvement or merely a temporary stabilization. Much will depend on investment, energy prices, external demand and the ability of European governments to turn ambitious plans for competitiveness, infrastructure and defence into measurable economic activity.
For now, Europe’s economy appears to be moving forward — but cautiously.
