Eurozone economy beats forecasts with stronger fourth-quarter growth

The Eurozone has recorded better-than-expected economic growth after expanding by 0.3% in Q4 of 2025. Analysts had predicted the bloc’s economy would grow by 0.2%. The bloc’s economic driver, centered on consumption and investment, kicked into higher gear towards the end of the year.

The Eurozone’s seasonally adjusted GDP rose by 0.3% in the fourth quarter of 2025, exceeding analysts’ forecasts. The euro area’s GDP increased by 0.3% and by 0.4% in the EU, according to data from Eurostat, the statistical office of the European Union. The region’s economic growth is primarily credited to consumption and investment that picked up steam, compensating for low exports and uncertainty from U.S. trade policy.

Eurozone economy grows despite reduced imports and the U.S. trade war

The growth witnessed in Q4 demonstrates the bloc’s resilience despite concerns that the economy would succumb to strains from increased competition from Chinese exports, the trade war with the U.S., and military conflict along its eastern border. Spain’s growth stood out after its economy expanded faster than analysts expected, logging 0.8%. Germany’s economy, which seemingly struggled for years with growth, logged an expansion of 0.3%, beating the 0.2% growth that economists had predicted.

ING economist Carsten Brzeski noted Germany’s performance and said that its “fourth quarter performance is admittedly modest yet still the best quarterly performance in the last three years.” Italy also performed better than economists had anticipated, expanding by 0.3%, while France logged 0.2% growth despite huddles caused by political instability. Eurostat data show that Ireland is the only country in the euro zone whose economy declined QoQ. The data showed the economy had declined by 0.6% after posting a strong 7.4% in Q1 of 2025.

Eurozone sees a positive outlook in 2026 as UK braces for hardships.

The figures point to a stronger outlook for the Eurozone in 2026. Economic sentiment shows an unexpected rise, driven by gains in both France and Germany and broad-based improvements across all major sectors. Industrial activity is stabilising, while households are beginning to draw down their historically high savings rates. The unemployment rate in the region remains near record lows, and inflation is hovering around 2%, the European Central Bank’s target.

The sentiment is further enhanced by Germany’s renewed yet slow spending on defence and infrastructure. The investment could begin to lift growth from the second quarter, ending three years of stagnation and providing a boost to the wider eurozone. The boost is particularly significant given the bloc’s deep interlinkages, with German industry relying heavily on suppliers across the region. Germany is the eurozone’s largest economy.

However, export growth is unlikely to rebound quickly. U.S. tariffs, intensifying competition from China, and the weakening of the dollar over the past year suggest a structural shift in global trade patterns. The sentiment relies more on domestic demand to sustain growth, placing the burden on the domestic economy to find new sources of growth.

But economists say consumption and intra-EU trade are seen as solid foundations. Most projections see growth in the 1.2%-1.5% range for years, or around the bloc’s potential. This environment gives the ECB a notably comfortable position since inflation is under control, interest rates are neutral, and growth is stable. As a result, investors are pricing in steady interest rates throughout the year that can only be disrupted by major shocks.

On the other hand, the UK economy is showing signs of hardship amid slow growth. Cryptopolitan previously reported that the slow growth came just after Chancellor of the Exchequer Rachael Reeves announced the budget, which diminished hopes for improvement this year amid a weakening labor market. Analysts have noted that stagnant economic growth in the country could be improved if the labor market strengthens and cautious consumers begin to ease their spending restraints.

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