Consumer confidence in the Eurozone improved notably in January 2026, reaching its highest level since February 2025, according to preliminary data released by the European Commission. The flash estimate of the consumer confidence indicator rose to -12.4, up 0.8 points from a revised -13.2 in December 2025.
The increase exceeded market expectations, as economists surveyed by Reuters had forecast a more modest rise to -12.9.
“This reading suggests that households are beginning the year with slightly improved expectations, even as economic uncertainty remains elevated,” one market analyst said.
Despite the improvement, confidence levels remain below the long-term average, underscoring that households continue to face persistent economic headwinds.
EU Confidence Also Improves but Remains Below Historical Norms
The broader European Union recorded a similar improvement, with consumer confidence climbing 0.8 points to -11.7, also marking an 11-month high. Like the Eurozone figure, the EU reading remains below historical averages, highlighting lingering caution among consumers.
The uptick reflects a gradual recovery in consumer morale following years of inflation pressures and geopolitical instability that have weighed heavily on household sentiment.
Key Drivers Behind the Improvement
While the European Commission did not specify the exact drivers behind the increase in its flash release, economists point to several contributing factors.
Easing inflation across the Eurozone, combined with recent interest rate adjustments by the European Central Bank, may have helped improve expectations around household finances. Additionally, unemployment remains near record lows, providing income stability and supporting consumer spending despite sluggish growth.
“Stable employment conditions are acting as a crucial buffer for consumers, even as growth remains muted,” an economist familiar with the survey data noted.
However, the data was collected between January 1 and January 21, 2026, before escalating U.S. and European tensions over Greenland. Analysts caution that future sentiment readings could soften as geopolitical risks intensify.
Concerns over potential U.S. policy shifts on NATO commitments and tariffs, along with regional challenges such as political stalemates in the United Kingdom and labor disputes in Ireland, could weigh on confidence in the coming months.
Broader Economic Context Remains Mixed
The consumer confidence figures arrive against a backdrop of uneven economic signals across Europe. The Economic Sentiment Indicator for December 2025 showed relative stability in the European Union at 96.8, while the Eurozone edged slightly lower to 96.7. Both readings remain below the long-term average of 100.
Employment expectations also weakened, declining 0.9 points in both the EU and the Eurozone.
Looking ahead, economists expect gradual growth acceleration in 2026, supported by consumer spending and investment. However, uncertainty over the timing and scale of fiscal stimulus continues to cloud the outlook.
Trading Economics forecasts the consumer confidence index to hover around -13.0 by the end of the first quarter, with longer-term projections suggesting stabilization near -12.0 by 2027. Final results from the full consumer survey, including updated monthly sentiment indicators, are scheduled for release on January 29, 2026.
Market and Policy Implications
The stronger-than-expected confidence reading could offer modest support to Eurozone equities and the euro, both of which have faced volatility amid shifting global dynamics.
For policymakers at the European Central Bank, the data reinforces the challenge of balancing inflation control with measures to support economic recovery.
“While the improvement is encouraging, it does not yet signal a return to robust growth,” one analyst said. “External risks remain significant, and confidence could reverse quickly if conditions deteriorate.”
The latest figures provide a cautious sign of resilience in the Eurozone economy, but sustained improvement will depend on how policymakers and markets navigate ongoing domestic and international challenges.
Further updates are expected as additional economic data is released later this month.