Eurozone GDP accelerates more than expected, but momentum likely to fade

(Sharecast News) - Economic activity across the eurozone increased by more than expected in the first quarter of 2025, according to figures out on Wednesday from Eurostat, though a potential slowdown is looming as the impact of US trade tariffs are felt over the coming months.

Euro area gross domestic product expanded by 0.4% over the first three months of the year, picking up from the 0.2% growth rate seen in the fourth quarter.

This was comfortably ahead of the consensus forecast for another 0.2% expansion, and matched the highest quarterly growth rate seen for the region since the third quarter of 2023.

Economic powerhouses Germany and France managed to avoid a recession by returning to growth of 0.2% and 0.1% over the quarter, respectively, after both economies contracted at the end of last year.

The strongest quarterly growth rate was seen in Ireland at 3.2%, while Spain and Lithuania both saw GDP increase by 0.6%.

Compared with the first quarter of 2024, eurozone GDP was up 1.2%, with the annual rate of growth holding steady from the fourth quarter.

Looking ahead, however, analysts widely predict that the recent pickup in momentum is likely to reverse as the impact of the Trump administration's trade war - which officially kicked off in early April with the introduction of sweeping tariffs on imports into the US - is reflected in second-quarter GDP figures.

Economists have pencilled in no GDP growth across the eurozone in the second quarter, and just 0.1% in the third.