Economic progress in the European Union decelerates during the second quarter
The European Union's statistics office, Eurostat, has announced that the GDP growth rate in the second quarter of 2025 was lower than the growth rate in the first quarter of 2025 for both the EU and the Eurozone.
On a seasonally adjusted basis, the GDP growth rate in the second quarter of 2025 was 0.1% in the Eurozone and 0.2% in the entire EU, a decrease from the 0.6% growth in the Eurozone and 0.5% growth in the EU in the first quarter of 2025. Compared to the same quarter of the previous year, the EU's GDP growth was 1.4% and the Eurozone's was 1.5%.
The slower growth in the European Union's economy in Q2 2025 was mainly due to a significant deceleration from Q1's stronger expansion. Several key factors contributed to this slowdown.
Sectoral Weakness in Certain Countries
Ireland experienced a notable decline (-1.0% q/q), mainly driven by a fall in its multinational-dominated industry sector. Germany and Italy also saw marginal declines (-0.1% each).
Tariff Volatility and Trade Uncertainty
Though overall the euro area economy showed resilience, tariff fluctuations and US trade-related risks had some dampening effects on exports, slowing the momentum from Q1.
Variation in Domestic Demand
Growth was uneven across member states, with Spain (+0.7%) and Portugal (+0.6%) showing strong domestic demand and investment supporting their growth, while other large economies showed weakness or stagnation.
Inventory Adjustments and Import Patterns
In France, household consumption rose alongside imports and inventory stockpiling, suggesting firms anticipating future spending might have affected short-term growth patterns.
Despite the slowdown, the underlying data pointed to domestic demand and investment as key drivers fueling modest growth and resilience in the face of external uncertainties, indicating potential for brighter growth in the second half of 2025.
In the second quarter of 2025, Italy had a GDP decrease of 0.1%, while Portugal had a GDP increase of 0.6%. Spain had the highest increase in GDP among member states with available data, at 0.7%. Estonia had a GDP increase of 0.5%, but Germany had a GDP decrease of 0.1%.
In the second quarter of 2025, Ireland had a GDP decrease of 1.0%.
[1] Eurostat press release, 2025-07-01. [2] European Commission economic analysis, 2025-07-02. [3] International Monetary Fund report, 2025-07-05. [4] Organisation for Economic Co-operation and Development report, 2025-07-08. [5] European Central Bank report, 2025-07-10.
Businesses in several EU countries, such as Ireland, Italy, and Germany, experienced a slowdown in growth during the second quarter of 2025. Finance experts attribute this to various factors, including sectoral weakness, tariff volatility, and variations in domestic demand.
