Euro Area GDP Unexpectedly Slows

The Eurozone GDP expanded by 0.1% from the previous quarter in the first quarter of 2026, missing the market consensus of a 0.2% expansion, and slowing from the 0.2% increase from the earlier period. The data reflected pressure from the tight supply of energy that is essential for major economies in the currency bloc, after the outbreak of war in the Middle East halted flows of oil, its byproducts, and liquified natural gas. The inflationary pressure from shortage risks drove ECB policymakers to consider higher rates this year and its largest members to revise growth downwards. French GDP projections were trimmed and its Q1 GDP unexpectedly stalled (vs 0.2% in Q4), while Italy (0.2% vs 0.3%) revised its projection lower and hinted it may not meet its fiscal projections despite. In turn, the German GDP expanded faster (0.3% vs 0.2%) amid infrastructure and defense deficit spending. Slower output was also seen from the Netherlands (0.1% vs 0.4%).

The Euro Area economy grew by 0.2% in Q4 2025, below earlier estimates of 0.3% and down from 0.3% in Q3, highlighting modest momentum despite easing inflation, lower interest rates, and resilience amid headwinds from US trade tariffs on EU imports. Household consumption rose 0.4%, up from 0.2% in Q3, while growth slowed for fixed investment (0.6% vs 1.3%) and public spending (0.5% vs 0.7%). Both inventory changes and net trade subtracted 0.1 percentage points each from GDP growth. Among major economies, Spain led with 0.8% growth, driven by strong household consumption and investment, followed by the Netherlands at 0.5%. Germany and Italy each grew 0.3%, while France lagged at 0.2%. On an annual basis, Eurozone GDP expanded 1.2% in Q4, slightly below the preliminary 1.3% and down from 1.4% in Q3. For full-year 2025, growth reached 1.4%, just below earlier estimates of 1.5% but accelerating from 0.9% in 2024.

The euro area economy expanded by 0.3% in Q4 2025, confirming earlier estimates and matching the pace recorded in the previous three months. The data underscore the bloc’s resilience amid easing inflation and lower interest rates, despite headwinds from US trade tariffs on EU imports. Among the region’s largest economies, Spain delivered the strongest performance, with output rising 0.8%, supported by solid household consumption and fixed investment. The Netherlands followed with a 0.5% expansion, largely driven by exports. Germany and Italy each posted growth of 0.3%, while France lagged behind with a 0.2% increase. On an annual basis, Eurozone GDP grew by 1.3%, slightly easing from 1.4% in Q3. For the full year 2025, the GDP expanded by 1.5%, accelerating from 0.9% in 2024. Looking ahead, both the European Commission and the ECB expect growth to moderate to around 1.2% in 2026 amid persistent geopolitical tensions and trade policy uncertainty, before edging higher to 1.4% in 2027.