GDP (Gross Domestic Product) growth in the OECD area increased slightly to 0.5% in Q2 2026, up from 0.4% in the previous quarter, according to provisional estimates (Figure 1). This reflected a mixed picture across the 30 OECD countries for which data were available. In Q2 2026, 27 countries recorded growth, but at varying rates, while 3 saw no change in GDP.
GDP growth in the G7 slowed to 0.3% in Q2 2026, down from 0.4% in Q1, reflecting slower growth in five G7 countries: Germany, from 0.4% to 0.2%; Italy, from 0.3% to 0.2%; Japan, from 0.5% to 0.3%; the United Kingdom, from 0.6% to 0.4%; and the United States, from 0.5% to 0.4%. In Japan, the slowdown mainly reflected stagnant private consumption, destocking and a decline in investment. In the United Kingdom, weaker private consumption and a decline in government consumption weighed on economic activity. In the United States, slower growth mainly reflected weaker export growth, destocking and a decrease in government consumption. By contrast, growth in Canada accelerated from zero in Q1 to 0.8% in Q2. In France, GDP returned to growth (0.2%) in Q2, following a contraction of 0.1% in Q1.
Among other OECD countries for which data were available, Ireland recorded the highest quarter-on-quarter GDP growth in Q2, at 3.9%, followed by Israel, at 3.6%. At the other end of the spectrum, GDP was unchanged in Austria, Belgium and Chile.
Year-on-year GDP growth in the OECD area increased to 2.3% in Q2 2026, up from 1.7% in Q1 (Table 2). Among G7 economies, the United States recorded the highest annual GDP growth, at 2.1%, while Japan recorded the lowest, at 0.5%.
Click here to access the interactive chart.
 
 
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€3.9 bn surplus for EU

Euro area
The first estimates of euro area balance showed a €8.6 bn surplus in trade in goods with the rest of the world in June 2026, compared with + €4.8 bn in June 2025.
The euro area exports of goods to the rest of the world in June 2026 were €272.5 billion, an increase of 14.4% compared with June 2025 (€238.2 bn).
Imports from the rest of the world stood at €264.0 bn, a rise of 13.1% compared with June 2025 (€233.4 bn).

In June 2026, the euro area balance registered a surplus of €8.6 bn, following a deficit of €9.0 bn in May 2026. Compared with June 2025, when the balance stood at a surplus of €4.8 bn, the latest figure represented an improvement of €3.8 bn. In the presence of a larger energy deficit, this increase was primarily driven by a higher surplus in chemicals and related products, and by surpluses in other manufactured goods as well as in food and drink. The surplus of machinery and vehicles also slightly improved.

€3.9 bn surplus for EU

In January to June 2026, the euro area recorded a surplus of €9.8 bn, compared with €82.2 bn in January-June 2025.
The euro area exports of goods to the rest of the world fell to €1 487.2 bn (a decrease of 0.2% compared with January-June 2025), and imports rose to €1 477.4 bn (an increase of 4.9% compared with January-June 2025).
Intra-euro area trade rose to €1 408.2 bn in January-June 2026, up by 4.7% compared with January-June 2025.
European Union
The EU balance showed a €3.9 bn surplus in trade in goods with the rest of the world in June 2026, compared with +€5.2 bn in June 2025.
The extra-EU exports of goods in June 2026 were €241.5 billion, up by 12.5% compared with June 2025 (€214.7 bn).
Imports from the rest of the world stood at €237.7 bn, up by 13.5% compared with June 2025 (€209.5 bn).

In June 2026, the EU balance registered a surplus of €3.9 bn, following a deficit of €13.9 bn in May 2026. Compared with June 2025, when the balance stood at a surplus of €5.2 bn, the latest figure represented a deterioration of €1.3 bn. This deterioration was primarily driven by a larger energy deficit, partly offset by a wider surplus in chemicals and related products.

In January to June 2026, the EU recorded a deficit of €14.9 bn, compared with €74.1 bn in January-June 2025.
The extra-EU exports of goods fell to €1 317.0 bn (a decrease of 2.1% compared with January-June 2025), and imports rose to €1 331.9 bn (an increase of 4.7% compared with January-June 2025).
Intra-EU trade rose to €2 200.6 bn in January-June 2026, +5.7% compared with January-June 2025.
Annex – Seasonally adjusted data
In June 2026 compared with May 2026, euro area seasonally adjusted exports increased by 0.9%, while imports decreased by 2.1%. The seasonally adjusted balance was €1.8 bn, an increase compared with May (€-6.1 bn).
In June 2026 compared with May 2026, EU seasonally adjusted exports increased by 0.4%, while imports decreased by 2.1%. The seasonally adjusted balance was €-4.9 bn, a narrowing compared with May (€-10.8 bn).
In April-June 2026, euro area exports rose by 5.6%, while imports rose by 8.6%. Intra-EA trade rose by 3.9%.During the same period, EU exports increased by 5.4%, while imports rose by 9.9%. Intra-EU trade increased by 4.0%
Click here to access the interactive charts and tables.

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Blog | The rise of AI has driven a blistering rally in the tech sector, bringing stock market valuations to levels last seen during the dot-com bubble. Although AI is reshaping the economy, do today’s high valuations bear the risk of an abrupt and painful setback in the euro area?
Valuations on the US stock market, as measured by the CAPE ratio, are currently close to their historical peak.[1] Euro area equity valuations have also risen, albeit to a lesser extent (Chart 1). Markets on both sides of the Atlantic reflect investors’ enthusiasm about artificial intelligence (AI) shaping the economy and driving profits. The extremely optimistic valuations raise questions: do today’s stock market prices reflect a rational bet on the transformative technology? Or are we seeing a remake of the dot-com bubble? We argue that economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely.
A sharp stock market correction would have severe consequences for the euro area, through two channels. One is euro area investors’ direct exposure to the Magnificent Seven stocks (hereafter Mag7) and the other is the degree of overexuberance in euro area stock markets themselves.[2] This post explains why a correction should be expected even if current valuations are rational, why that matters not only to the shareholders who would take the direct hit, and what it implies for the euro area specifically.
Chart 1
US and euro area stock market valuations

a) S&P 500 Index (cyclically adjusted price-to-earnings ratio)

b) Euro area Market Equity Index (cyclically adjusted price-to-earnings ratio)

(Index)

(Index)

Source: Datastream
Notes: Price-earnings ratio (monthly) from 1980 to 2026. Numerator: real (inflation-corrected) S&P Composite Stock Price Index (panel a) and Euro Stoxx 50 Price Index (panel b). Denominator: moving average over preceding ten years of real S&P Composite (panel a) and Market Equity (panel b) earnings.

Why do technological revolutions so often end in a boom and bust?
The current excitement surrounding AI has many historical precedents. To name just a few: the railway boom of the 19th century, the expansion of electricity and radio in the 1920s and the surge of the internet, or the “dot-com era”, in the 1990s. In each case, a genuinely transformative technology attracted investment, and the stock market valuations of firms that adopted it rose strongly before falling sharply. Economic research offers two complementary explanations.
First, the rational view argues that high valuations can be justified by extreme uncertainty about a new technology’s productivity.[3] Why has Nvidia’s share price risen 20-fold since 2022? Because investors rationally perceived that the company would become the next Google – with a highly uncertain and potentially large upside. In the worst case in such a scenario, investors lose their investment. But in the best case, the gains are large and genuinely hard to bound. This “option value” increases the stock valuations of early adopters, causing their price-to-earnings ratios to rise sharply.
Even if the technology succeeds, stock prices may eventually fall. Why? The nature of uncertainty shifts from a “single sector” to the “entire” economy. Initially, the new technology is like a small-scale experiment. If it fails, it’s unfortunate for that company, but the rest of the economy is unaffected. The risk can be diversified away. As adoption spreads, the same uncertainty becomes economy wide. If something then goes wrong with that technology, the whole economy suffers. This risk cannot be diversified, so investors demand a higher risk premium. However, this does not necessarily mean that profits will fall. Adoption itself is good news for cash flows, but the rising risk premium has the opposite effect and tends to prevail historically (Chart 2, blue line), unless profit growth is strong enough to compensate for that (Chart 2, yellow line). The exact timing is unknowable in advance. These boom-bust patterns are only identifiable with hindsight.
The second explanation for technology-driven boom and bust is the behavioural view. It holds that overconfident, overoptimistic investors bid up prices beyond fundamentals (see Chart 2, red line).[4] When overconfidence fades, prices can fall even more sharply than in the rational scenario.
Both views imply a boom followed by a correction, or a pullback from wherever valuations have risen, at some point in the future. This does not mean that today’s prices represent a ceiling. If AI proves to be transformative enough, valuations could still be much higher in the future, even after a correction. As mentioned previously, it is impossible to know in advance where we stand on this path. Furthermore, the case for expecting a correction is not dependent on whether today’s prices are rational or irrational. We should be aware of that and prepare. The rest of this blog post considers two ways in which such a correction might affect the euro area – wealth effects for euro area investors in US stocks and contagion to euro area stock markets.

Chart 2
Stylised boom-bust scenarios

(Index)

How exposed is the euro area to a fall in Mag7 prices?
The dominance of the Mag7 on widely held global indices (e.g. MSCI World) carries significant risks for euro area investors. Panel a) of Chart 3 shows that most euro area exposures to the Mag7 are via investment funds – mutual funds and exchange traded funds (ETFs) – rather than direct holdings. Using data on the underlying mutual fund investors, we can identify which euro area investors carry the greatest exposure to US technology equities (Chart 3, panel b). Euro area households, which are increasingly channelling funds into low-cost ETFs, have around €440 billion of exposures to US technology equities without necessarily being aware of the associated concentration risk. Insurance companies and pension funds also hold significant exposures to the Mag7.
This fund-based structure is itself a transmission channel. A sharp correction can force funds to sell assets to meet redemptions – first, liquid holdings and then, if the correction persists, distressed assets – pushing valuations down further and triggering more redemptions. This is why a Mag7 correction is a question of financial stability for the euro area, rather than just a private one. The more severe scenario is not the equity correction on its own but a correction that coincides with broader market instability that policymakers cannot easily calm: unlike in the dot-com episode, today’s starting point leaves markedly less room to cut interest rates or use fiscal policy to cushion the fallout.
Chart 3
Euro area investors’ Mag7 exposures

a) Direct exposures

b) Indirect exposures

(EUR billions)

(EUR billions)

Sources: ECB (SHSS and SHS-Look-through) and authors’ calculations.
Note: Holding amounts of the five largest investors in the euro area (market values, Q3 2025).

Is there overexuberance in euro area stock markets?
Beyond this exposure to the Mag7, is there also a risk of a home-grown correction? While euro area equity prices have risen substantially in recent years (Chart 1, panel b), valuation metrics such as price-to-earnings ratios remain considerably lower than in the United States (Chart 1, panel a). The euro area macroeconomic environment in the information and communication technology sector currently appears resilient compared with the times of the dot-com bubble. Productivity and markups in the sector are rising, the business climate in euro area digital services does not seem exuberant and euro area firms’ AI adoption is rising notably, only a few years after the launch of ChatGPT in 2022. The global AI boom has also sparked an ongoing and profound digital transformation across the euro area. The overall increase in digital investment in the euro area over the past decade was more than three times the cumulative growth in GDP over that period.
In sum, the euro area AI transformation is proceeding at a steady if unspectacular pace. On the one hand, euro area stock markets are dominated by “old economy” stocks, which show little of the AI excitement that we see in the US Mag7, reducing the risk of a future correction. On the other hand, euro area and US stock markets have historically been very highly correlated, meaning that a US correction will not leave the euro area unaffected.
Conclusion
Historical experience suggests that technological revolutions carry risks of a boom-bust cycle in asset prices, and this risk does not depend on today’s valuations being rational or irrational. The euro area’s smaller, less richly valued tech sector limits the risk of a home-grown crash. But this offers little reassurance: households, insurers and pension funds have significant exposures through global index trackers, and US equity stress has historically also had an impact on euro area stock markets. The effects of a US correction could extend beyond financial markets to euro area sentiment, financing conditions and hiring. A US AI fallout would not remain a US problem.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

The CAPE (cyclically adjusted price-to-earnings) ratio was developed by Robert Shiller. The S&P 500 CAPE is a measure of stock market valuations that compares share prices of the leading 500 US-listed companies with average inflation adjusted earnings over the previous ten years.

The Magnificent Seven stocks are a group of high-performing and influential companies in the US stock market: Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft and NVIDIA.

See Pástor, Ľ. and Veronesi, P. (2009), “Technological revolutions and stock prices”, American Economic Review, 99(4), pp. 1451-1483.

See, for example, Scheinkman, J. A. (2014), Speculation, trading, and bubbles, Columbia University Press, and Hong, H. and Stein, J. C. (2007), Disagreement and the stock market, Journal of Economic Perspectives, 21(2), pp.109-128.

 
 
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Governments have good reasons to use tariffs or sanctions for geopolitical purposes but should consider the trade-offs.
Governments worldwide increasingly are using economic policies, such as export bans, financial sanctions, and trade tariffs, to achieve noneconomic goals. The benefits of these geoeconomic policies can be significant, accomplishing a geopolitical purpose without threatening, or using, military force—and without the high human and economic costs of war. Perhaps the world should welcome this.
Yet coercive policies can be costly for nations that impose them. As appealing as it may be to use economic policies for coercive purposes, sometimes the benefits are not worth the cost.
Close connection
International politics and international economics have always been closely intertwined. The age of mercantilism that prevailed from the 15th to the early 19th centuries was explicitly organized around the interaction of economic and military prowess. In his 1618 work A Discourse of the Invention of Ships, Anchors, Compasse &c, the explorer Sir Walter Raleigh, a theorist and practitioner of English mercantilism, opines, “Whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself.”
Mercantilist policies used military control over shipping routes and colonies to extract resources from trading partners and overseas possessions and used those resources to finance additional military spending. For several hundred years, the major powers’ conflicts and alliances were reflected in both their military and economic relations.
As Britain led the rich countries of Europe away from mercantilism and toward freer trade and financial flows in the early 19th century, the European powers increasingly separated economic policymaking from great-power politics. There were still occasional blockades and embargoes, and economic policies were often used as an instrument of colonial control. But the prevailing ideology and practice tended to keep economic and military policies relatively separate. This era of free trade saw very rapid economic growth by historical standards, which seemed to confirm the wisdom of divorcing economic from diplomatic relations.
However, as countries strove to catch up to Britain in the late 19th and early 20th centuries, geopolitical contention and a race for colonies brought geoeconomics back to the fore. Colonial powers tightened their control over their empires, Germany carved out a sphere of economic and political interest in central Europe, and the United States cemented its predominance in the Western Hemisphere during a period of rising economic nationalism that has parallels today.
The Cold War reinforced the connection between geopolitics and economics: The Western powers largely sealed off the Soviet Union and its allies from international trade and investment even as Western international economic integration grew dramatically. For their part, the Soviets and their allies, along with China, showed little interest in the world economy.
The end of the Soviet Union and the Cold War, along with the onset of full-scale globalization in the late 1980s and early 1990s, led most governments to conduct their international economic relations with little concern for military or other geopolitical considerations. As China and Vietnam, and later the former Soviet republics and their allies, joined the world economy, it seemed that global acceptance of economic integration had overcome the worst features of great-power politics.
Expectations at the start of the new millennium that international politics and international economics would stay separate have turned out to be wrong. Renewed competition among the major powers has encompassed their economic relations—think Western sanctions on Russia and ongoing trade conflicts between China and the United States. The global pandemic highlighted fears that long and complex supply chains could jeopardize countries’ access to essential goods. The full-scale Russian invasion of Ukraine has brought major military conflict to Europe in ways that many considered unthinkable. It is hardly surprising that governments are using economic policies to address the rising geopolitical tensions they face.
Benefits of coercion
Governments have good reasons to use economic policies for geopolitical purposes. Sanctions, embargoes, tariffs, and other such measures can coerce adversaries without the threat or use of force. They can impose costs on target countries and governments, induce powerful groups abroad to pressure their own governments to change course, and persuade allies to collaborate in compelling an adversary to make concessions.
The appeal of geoeconomic policies can be clear, although they may be difficult to measure. Many geopolitical goals are hard to quantify, and hard even to think of in monetary terms. How much is national security worth? What is the value of isolating an adversary, cementing an alliance, staving off a potential attack, avoiding a disastrous war?
While the benefits of geoeconomic policies may be intangible, many of the costs are more directly economic and amenable to analysis. Policymakers, analysts, and constituents should think about the trade-offs involved, about what a country may be giving up when it imposes sanctions or tariffs for geopolitical purposes. This does not mean that such policies should be avoided—only that both their benefits and their costs should be considered.
Coercive economic policies typically impose costs on the country that uses them. Those costs come in many varieties: Some examples follow.
Costs to economic efficiency. Almost by definition, geoeconomic policies move a country’s economy away from its most productive purposes. Restricting imports limits the country’s access to goods more efficiently produced elsewhere; restricting exports limits the country’s access to profitable foreign markets. Measures that restrict the movement of goods and capital can compromise a country’s comparative advantage and reduce its productive efficiency. This was, after all, the argument of pro-trade economists from Adam Smith to David Ricardo and John Maynard Keynes. As Keynes wrote, “The community as a whole cannot hope to gain by making artificially scarce what the country wants.”
Governments pursue geoeconomic policies because they are willing to sacrifice aggregate (economic) welfare for geopolitical purposes. Within this objective, there are specific constraints that highlight the trade-offs geoeconomic policy entails.
Costs to specialization. Specialization is central to productivity and economic growth. The division of labor is central to broader economic efficiency and, as Adam Smith wrote, “The division of labor is limited by the extent of the market.” Purposely giving up a broader market limits how much a national economy can usefully specialize.
There is a more explicit trade-off. More specialized economic activities are both particularly valuable and particularly vulnerable. They are valuable because specialized production is especially profitable, given its scarcity and specificity. They are vulnerable because the scarcity and specificity of specialized production also make it harder to replace. The more specialized the productive activity, the greater the challenge in doing without it—and the more dangerous it is to rely on it.
Governments will thus try to avoid dependence on the more specialized products of other nations. Diversifying economic ties provides some protection against economic and geopolitical shocks and helps limit vulnerability. But it can also limit an economy’s efficiency and that of its trading partners.
Costs to innovation. Just as artificially limiting a country’s market reduces its ability to specialize, it also reduces its incentives to innovate. Producers invest in research and development to gain advantages in markets, and the larger the market and the fiercer the competition, the greater the reason to do so.
On the other hand, export controls that restrict a target economy’s access to technology give the target strong reasons to innovate. Nazi Germany developed synthetic rubber and methadone when faced with an Allied blockade that cut it off from natural supplies of rubber and opium. While this may not have been the most efficient use of German resources, it did counteract the impact of the geoeconomic policies. More recent evidence shows that sanctioned countries have invested heavily in innovation: Russia, China, and Iran have all responded to sanctions by ramping up research and development to try to replace goods no longer available.
Costs to credibility. A country’s good reputation is valuable: It encourages other countries to commit to potentially risky arrangements in trade, finance, and investment. If geoeconomic policies such as sanctions and asset freezes violate implicit or explicit contracts, it causes other countries to question whether they can trust commitments with those imposing such policies. As trust erodes, other governments and private companies are less willing to risk economic commitments that might be violated. This can deprive a country of valuable trade, investment, and financial ties—many of which rely on partners’ reputation for reliability.
Costs to domestic politics. The costs and benefits of geoeconomic policies may not be evenly distributed within the population, which can lead to domestic political conflict. The negative effects of sanctions or export controls, for example, may be severe for businesses that lose important and profitable economic ties. On the other hand, successful geoeconomic policies may create particularly profitable opportunities for companies and industries that gain market access or favorable treatment. Domestic businesses that suffer from the imposition of geoeconomic policies may resent those that benefit from their success. Such policies may thus be harder to impose, less credible, or more politically controversial. The last thing national leaders want when they pursue what they regard as key geopolitical policies is domestic political backlash—and so they need to pay close attention to the domestic social costs of these policies.
Complete picture
Governments often adopt coercive economic policies in the midst of an immediate geopolitical struggle. The understandable focus on the near-term geopolitical goal—extracting concessions, forestalling harm—can obscure the longer-term economic costs. It may be difficult, in the heat of geopolitical conflict, for policymakers to keep in mind that sanctions can inflict lasting damage to the financial or commercial reputation of the sanctioner, damage that could outweigh the temporary geoeconomic advantage gained.
Geoeconomic policies may engender desirable behavior in other countries, but they have costs and involve trade-offs. Policymakers, analysts, and citizens need a clear picture of these costs. Geoeconomic policies can limit the efficient functioning of the economy, reducing incentives to specialize for maximum national productive efficiency. They can discourage domestic innovation but stimulate such activity by foreign rivals. They limit the activities available to national firms and industries. They can affect a country’s reputation for reliability and may damage its long-term economic prospects. And they may harm some industries or groups in the sending nation in favor of others, in ways that may be politically controversial.
Geoeconomic policies are a valuable tool of foreign policy whose benefits may be substantial, especially if they help avoid military conflict. There are times, however, when the costs may outweigh the benefits. We need a clear picture of the costs before we can determine whether the net benefits are positive.
 
 
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