Euro Area: GDP growth records best reading since Q2 2022 in Q1
GDP growth decelerates: According to a detailed release, GDP growth lost steam in Q2, falling to 0.1% on a seasonally-adjusted quarter-on-quarter basis from 0.6% in the first quarter. The print was in line with the flash estimate and marked the softest growth since Q4 2023. On an annual basis, economic growth slowed to 1.5% in Q2, compared to the previous quarter’s 1.6% expansion.
Broad-based downturn: The downturn was driven by weakening private consumption, fixed investment and exports.
Private consumption growth fell to 0.1% in Q2, marking the weakest expansion since Q4 2023 (Q1: +0.3% s.a. qoq). Moreover, fixed investment contracted 1.8% in Q2, marking the worst reading in a year (Q1: +2.7% s.a. qoq). Meanwhile, public consumption rebounded, growing 0.5% in Q2 (Q1: -0.1% s.a. qoq).
On the external front, exports of goods and services fell 0.5% on a seasonally-adjusted quarterly basis in the second quarter, which contrasts the first quarter’s 2.2% expansion, as front-loading efforts to the U.S. faded. Lastly, imports of goods and services were stable in Q2 (Q1: +2.2% s.a. qoq).
Looking at key economies, momentum in Germany, Ireland and Italy deteriorated, while France and Spain gained steam.
Momentum to remain downbeat in H2: GDP growth is seen remaining near Q2’s downbeat level in H2 as U.S. tariffs weigh on exports. Nonetheless, in 2025 as a whole, the economy should grow at a faster clip than in 2024, boosted by ECB monetary policy easing and softer price pressures.