The eurozone economy contracted for a third straight quarter in the first quarter of 2026, underscoring continued strain across the region. Weak demand in both manufacturing and services has kept growth under pressure, raising fresh concerns about the pace of recovery.

At the same time, the European Central Bank held its key interest rate at 2.25%, signaling caution as policymakers weigh stubborn economic softness against the need to keep inflation under control. The decision leaves borrowing costs unchanged for households and businesses already facing a difficult economic backdrop.

The latest figures add to a picture of an economy struggling to gain traction after months of uneven performance. Analysts are watching closely for signs that lower growth could force the ECB to reconsider its policy stance later in the year.

For now, the bank appears content to wait for clearer evidence of whether weakness is temporary or a deeper slowdown that could shape the outlook for the rest of 2026.

Manufacturing slowdown

Eurozone shrinks for third quarter as ECB leaves rates unchanged