Euro zone economy posts solid end to 2025 despite low exports and US trade strife

Euro zone GDP rose 0.3% quarter-on-quarter and 1.3% year-on-year in Q4 2025, supported by consumption and investment while exports stayed weak amid U.S. trade uncertainty.

The euro zone closed 2025 with somewhat stronger-than-expected growth, according to Eurostat data. Consumption and investment picked up and helped offset weak exports and uncertainty linked to U.S. trade policy. Growth was modest overall but consistent across several large economies. Early 2026 indicators suggest the bloc started the year with improved sentiment and stabilising industry. Key points: - Euro zone GDP grew 0.3% quarter-on-quarter and 1.3% year-on-year in Q4 2025, above Reuters poll expectations of 0.2% q/q and 1.2% y/y. - Consumption and investment were the main drivers that offset low exports and exceptional uncertainty from U.S. trade policy. - Country details include Spain expanding 0.8% q/q, Germany 0.3% q/q, Italy 0.3% q/q and France 0.2% q/q; Ireland showed a sharp statistical contraction tied to its multinational sector. - Early 2026 readings showed a jump in sentiment, signs of industry stabilisation, falling household savings rates, near-record low unemployment and inflation near the ECB's 2% target. Summary: The data point to resilience across the euro area as domestic demand and investment supported growth despite external headwinds. Germany's planned infrastructure and defence spending could have a measurable impact from the second quarter. Undetermined at this time.