Thermometers, it turns out, have become a leading indicator of economic growth
Deserted streets and parks, closed schools and cancelled public events. The recent heatwave in Europe brought back memories of the pandemic lockdowns. This time, however, it wasn’t a virus but record-breaking temperatures driving the disruption. European countries, including France, the UK, Switzerland and Germany, experienced their hottest days on record for June.
In France, record temperatures brought back horrible memories of the summer of 2003 when some 70,000 people, most of them elderly citizens, died from the extreme heat. What once seemed like a rare exception, even to those sceptical of climate change, is now becoming increasingly common. And as global warming intensifies, today’s extremes risk becoming tomorrow’s norms, with Europe in the midst of it.
Yet despite repeated warnings and growing awareness, heatwaves still bring large parts of the continent to its knees. A bit like heavy snow does in the winter. Several hospitals declared critical incidents due to the extreme heat, with cooling units breaking down and IT systems stalling, while schools, workplaces and railways were thrown into chaos, and wildfires broke out. People have drowned while trying to cool down, and in France, two nuclear reactors were forced to close due to a lack of cooling water.
While the record high temperatures during the day and overnight are clearly harmful for human health, they will also leave their mark on the European economy.
Gauging the Economic Impact of Heatwaves
For years, heatwaves were treated the way insurers treat hailstorms: a regrettable but temporary cost, smoothed out over the cycle. That framing is becoming outdated. A 2021 study of Europe’s worst heat years (2003, 2010, 2015 and 2018) put continent-wide GDP losses from reduced labour productivity alone at 0.3-0.5% (output, not GDP growth), exceeding 1% in the most exposed regions. Other studies add the costs of cooling and consequently calculate an even larger impact on growth. Add rising healthcare costs, emergency infrastructure repairs and the impact of heatwaves and drought on waterways, transportation or agriculture, and the negative impact on the economy grows further still.
Last year, a joint paper from the University of Mannheim and the ECB also put a number on the economic damage, analysing the heatwaves, droughts and floods of the summer of 2025. According to the paper, the European economy lost some 0.3% of output. This damage could grow to an accumulated 0.8% by 2029, taking into account the effects of lost productivity, supply chain disruption and depressed tourism revenue.
Previously, the ECB had also estimated that heatwaves and drought could push up food inflation by some 0.4-0.9pp, with that effect potentially doubling over the next 30 years.
In the past, it was tempting for northern Europeans to file heat risk under “somebody else’s problem”: Madrid’s not Munich’s. However, the data no longer supports this theory. To the contrary, Germany ranks third among Europe’s largest economies for cumulative heat losses up to 2030. Not because German summers will rival Seville’s, but because infrastructure, housing stock and labour-intensive sectors like construction and logistics were built for a cooler climate and haven’t caught up.
A January 2026 Climate Analytics assessment commissioned for the World Bank concluded, pointedly, that Germany still lacks comprehensive solutions to manage heat-stress risk, with adaptation planning lagging well behind the science. This conclusion is also confirmed when looking at an increasingly important time series from the European Commission’s business survey: weather as a limiting factor to production. It actually shows that over the last few summers, Spain and Germany experienced the most disruptive effects of summer heatwaves.
Heatwaves Pose a New Downside Risk to European Growth
Looking ahead, while the recent drop in energy prices should bring some relief to European households and companies, the current heatwaves bring a new downside risk for the European economy: potential supply chain frictions due to low water levels in main rivers and affected infrastructure like railways and highways, but also productivity losses.
In fact, the uncomfortable truth is that heatwaves have quietly graduated from “weather event” to “macro variable”. The thermometer, it turns out, has become a leading indicator.
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