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The Eurozone economy saw a growth of 0.4% in the first quarter of the year, exceeding expectations, before the announcement of sweeping tariffs by Donald Trump in early April.
This figure was double the 0.2% growth seen in the previous quarter, according to a flash estimate by Europe’s statistical office Eurostat. Economists surveyed by Reuters had anticipated that GDP growth would remain at that level.
However, the higher growth was described as “more appearance than reality” by Commerzbank economists, who noted that it was partly driven by one-off effects, including a 3.2% growth surge in Ireland.
Survey data in recent weeks has indicated a significant deterioration in business confidence in the Eurozone following the US president’s tariff announcements, with growth nearing zero.
Analysts predict that the global trade war initiated by the US president in early April will have a negative impact on the Eurozone’s economic performance in the coming months.
The European Central Bank has revised its growth forecast for 2025 to 0.9%, marking the sixth consecutive reduction. It is expected to further lower the forecast in its updated projections in June.
Traders in swaps markets are assigning an 85% probability to a further rate cut at the ECB’s next meeting in June, consistent with the probability before the release of Wednesday’s GDP data.
Earlier data showed that the German economy grew by 0.2% in the first quarter, meeting expectations after a contraction of 0.2% in the previous quarter.
On the other hand, France’s economy only saw a marginal growth of 0.1% in the first quarter, following a contraction of 0.1% in the last quarter of 2024.