European Leading Indicators | Rising headwinds have yet to knock Europe’s underlying momentum

Here we look at the European leading indicators in the world of economics.

For in-depth analysis into commodities, trade,  equities and more with a focus on Europe

Key Insights:

• The ECB raised its deposit rate by +25bps to 2.50% in September, responding to renewed inflationary pressure from higher energy prices linked to Middle East tensions. With the Federal Reserve also raising rates this month, the move points to a broader global shift towards tighter monetary policy. Economists now expect the ECB to deliver a further one to two hikes, although limited second-round inflation effects could create scope for rates to fall back towards 2% by late 2027 or early 2028.
  
  
• Despite a more uncertain backdrop, European commercial real estate performance remains stable. The latest MSCI Europe Quarterly Index shows returns continue to be supported by underlying income rather than capital appreciation. As of Q2 2026, annualised All Property total returns stood at 5.4%, driven by income return of 4.7% and capital growth of just 0.7%. Retail remained the strongest-performing sector, delivering annualised total returns of 7.3%, followed by Residential (6.5%) and Hotels (5.3%).
   
• September’s PMI data points to stronger-than-expected momentum across the Eurozone, with the Composite PMI rising to 53.1, its highest level in more than 3 years. Manufacturing activity remained steady at 52.7, while the Services PMI strengthened to 53.0 (from 51.6). Together, these indicators suggest that activity continued to expand despite higher energy prices. If this momentum is sustained, current PMI levels would be consistent with Q3 GDP growth of around +0.3% QoQ.