Economic expansion in the European Union decelerates during the second quarter
The European Union's economy showed a deceleration in growth during the second quarter of 2025, according to data released by Eurostat, the EU's statistical office.
Quarterly GDP growth in the euro area decreased from 0.6% in Q1 2025 to only 0.1% in Q2 2025, while the broader EU saw a drop from 0.5% to 0.2%. This slowdown can be attributed to several factors, including the unwinding of a Q1 import frontloading effect ahead of US tariffs, ongoing trade disputes leading to tariff volatility, and a moderation of domestic activity despite underlying resilience.
The Q1 growth was partly inflated by US import frontloading before tariff hikes, which boosted Q1 numbers and led to a softer Q2 base. Trade-related uncertainties and tariff volatility weighed on growth momentum, although domestic demand showed some resilience. Spain and Portugal recorded the strongest gains among member states, while Germany and Italy saw slight contractions.
Despite these challenges, inflation remained steady at the European Central Bank’s 2% target, and core inflation pressures were stable. This corresponds with moderate economic activity and influences the European Central Bank’s cautious stance on further rate changes.
Analysts remain cautiously optimistic that recent improvements in surveys and reduced US trade-related downside risks could support better growth in the second half of 2025. However, Q2 growth clearly signals a deceleration from earlier quarters.
Among the individual countries, Spain recorded the highest increase of 0.7% compared to the previous quarter, followed by Portugal with a 0.6% increase. Estonia had a 0.5% increase, while Ireland experienced a decrease of 1.0%. Germany and Italy each had a decrease of 0.1%.
It's important to note that the reasons for the differences in GDP growth between countries in the second quarter of 2025 were not specified in the report. Additionally, no specific country data was provided for the comparison between the second quarter of 2025 and the second quarter of 2024, or for the comparison between the second quarter of 2025 and the first quarter of 2025.
The GDP growth rates provided are on a seasonally adjusted basis, and all countries' growth rates compared to the corresponding quarter of the previous year were positive. The article does not provide any information about the expectations for future economic growth in the EU and the Eurozone.
The data released by Eurostat shows a slowdown in the EU's economic growth in Q2 2025, primarily due to the fading effects of prior tariff-related import surges, persistent trade tariff volatility, and uneven performances across EU countries, despite some underlying domestic economic resilience.
The slower growth of the euro area's business sector in Q2 2025, as indicated by the GDP, can be attributed to the fading effects of prior tariff-related import surges and persistent trade tariff volatility. Despite these challenges, the finance sector in some countries, such as Spain and Portugal, still showed moderate growth, providing a glimmer of hope for future business expansion.
