Italy beats growth estimates in early 2026 as France’s economy contracts
Italy’s economy grew more strongly than first estimated in the opening months of 2026, according to Bloomberg Economics, a revision that suggests the country carried more momentum into the year than previously thought before the economic shock from the Iran war began to weigh on activity.
The upward revision matters because it points to a sturdier starting position for Italy’s economy at a time when policymakers across Europe are trying to judge how much damage recent geopolitical turmoil has done to growth. Bloomberg said the revised figures showed Italy maintaining the stronger pace it had built up last year, before disruption linked to the conflict affected the outlook.
The contrast with France was sharp. France’s economy unexpectedly contracted in the first quarter of 2026, according to a separate Bloomberg Economics report, underscoring weaker resilience in Europe’s second-largest economy. That came after official data from INSEE showed French GDP fell 0.1% in the quarter, a downward revision from an earlier flat reading.
The French decline was driven by weakness in exports and construction, while inflation also accelerated in May, according to reporting from local and regional news outlets citing INSEE data. That combination of softer output and firmer prices adds pressure on households and businesses already facing uncertainty from the fallout of the Iran war.
Together, the two reports suggest a widening divergence within the euro area at the start of 2026: Italy entered the year with better-than-expected growth, while France stumbled. For the European Central Bank and national governments, that split matters because it affects expectations for demand, inflation, and the pace of any broader recovery across the bloc.
What happens next will depend on whether the shock from the Iran war continues to spread through trade, energy, and confidence channels. Economists will be watching upcoming revisions and second-quarter data to see whether Italy can preserve its momentum and whether France can recover from the first-quarter setback.