GDP growth records best reading since Q2 2022 in Q1

Ireland boosts Q1’s print: A second statistical release by Eurostat put GDP growth at 0.6% on a seasonally adjusted quarter-on-quarter basis in Q1, up from the previous estimate of 0.3% and Q4’s upwardly revised 0.3%. The print marked an over two-year high. That said, excluding the sharp acceleration in the Irish economy—highly volatile due to its heavy presence of multinationals—sequential growth was stable at 0.3%. On an annual basis, economic growth edged up to 1.5% in Q1 from the previous period's 1.2% increase and marked the fastest expansion since Q1 2023.

Investment and exports lead the charge: Domestically, fixed investment growth accelerated to 1.8% in sequential terms in Q1, following the 0.7% increase recorded in the prior quarter, boosted by ECB rate cuts and a sharp acceleration in Ireland. Less positively, household spending growth fell to 0.2% in Q1, marking the weakest expansion since Q2 2024 (Q4 2024: +0.5% s.a. qoq). Moreover, public spending ground to a halt in Q1 after growing 0.4% in Q4. On the external front, exports of goods and services rose 1.9% in the first quarter due to front-loading ahead of U.S. tariffs, marking the best reading since Q2 2024 (Q4 2024: 0.0% s.a. qoq). Meanwhile, imports of goods and services bounced back, growing 1.4% in Q1 (Q4 2024: -0.1% s.a. qoq).

Momentum to cool ahead: Our panel expects sequential GDP growth to grind to a near-halt in Q2–Q3 before regaining some strength in Q4. Fixed investment is expected to moderate after Q1’s stellar reading, while exports should cool markedly as the boost from front-loading fades and Euro area countries face a 10% blanket tariff and 25% levy on aluminium, cars and steel. The evolution of EU-U.S. trade talks is the main factor to track, with a comprehensive trade deal posing an upside risk to the outlook.

Panelist insight: Analysts at the EIU commented: “Short-term growth will be highly volatile owing to erratic US policymaking and secondary impacts from the US-China trade war. Even if a US-EU trade deal is agreed, we expect US import tariffs to rise significantly from previous levels, which will weaken export prospects.”

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