Euro zone GDP grows 0.4% in first quarter
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The news: The Euro area has beaten expectations to grow 0.4% during the first quarter of the year.
The numbers: A preliminary reading of the bloc’s GDP for Q1 shows the Euro zone growing at 0.4%, 0.2% ahead of expectations. Europe’s largest economy, Germany, rose 0.2% during the period. French GDP added 0.1% across the three-month stretch.
Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 1.2% in the euro area in the first quarter of 2025.
The context: While the positive read shows that the Euro zone started 2025 on a stronger footing than had been anticipated, growth is expected to fall off sharply over the next six months as tariffs begin to take hold.
Just two days after the end of Q1, US President Donald Trump began his rollout of a wave of ‘reciprocal tariffs’ which upended global trade and rattled markets.
Despite Trump announcing a 90-day ‘pause’ on the baseline tariffs, existing levies, such as the 25% tariffs on steel and autos, remain and continue to add uncertainty to the global economy.
In March, the European Central Bank said it expected euro zone growth to reach 0.9% in 2025, trimming its January forecast. The ECB's June projections are likely to significantly shape upcoming rate decisions.
ECB President Christine Lagarde recently commented on the impact of US tariffs on potential growth, stating that while “disinflationary process is so much on track that we are nearing completion,” there were shocks that would “dampen” economic growth.
