(Oct 30): The euro-area economy expanded more than anticipated, displaying resilience to higher US tariffs with France recording its strongest growth in over two years.
Third-quarter gross domestic product rose 0.2% from the previous three months, up from 0.1% in the second, Eurostat said Thursday. Analysts in a Bloomberg survey had estimated another 0.1% advance.
France was the main reason behind the positive surprise, reporting a jump of 0.5% in output thanks to trade and domestic demand. Germany, the region’s largest economy, joined Italy in stagnation with both narrowly avoiding recessions. Data a day earlier showed another strong quarter for Spain, a persistent outperformer.
Other readings were mixed: While the Netherlands saw growth of 0.4%, Belgium 0.3%, Austria 0.1% and Portugal 0.8%, Ireland, Finland and Lithuania all contracted.
The numbers, which arrived just hours before the European Central Bank sets interest rates, suggest the 20-nation bloc is coping well with the tariff turmoil unleashed by Donald Trump. While growth is currently subdued, fresh impetus is likely next year as governments ramp up higher military and infrastructure outlays.
The ECB has lowered borrowing costs eight times this cycle but doesn’t think additional monetary easing will perk output up much at the current juncture, and is set to hold its deposit rate at 2% for a third straight meeting this afternoon.
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Policymakers are happy with inflation that’s hovering near their 2% target, despite separate data showing Spanish consumer prices rose 3.2% from a year ago in October — exceeding expectations for a 3% increase.
“The euro-area economy fared a little better than expected, driven by a GDP beat in France and continued strong momentum in Spain. While there’s tentative evidence tariffs could be weighing on Germany, the big picture remains one of resilience for now. That will support the ECB’s view that no further rate cuts are needed in the near future,” said Bloomberg Economics.
German regional numbers suggest the national inflation reading — due later on Thursday — will slightly fall to 2.3% in October from 2.4% in September, according to Martin Ademmer of Bloomberg Economics.
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Germany’s stagnation came as machinery investments helped offset falling exports, the statistics office said. The country has been jolted by US trade policy that boosted activity in early 2025 as firms rushed to avoid higher tariffs before later weighing on it.
Chancellor Friedrich Merz is trying to end two years of contraction by splashing hundreds of billions of euros on infrastructure and defence. While government advisers see public spending boosting growth, they warn that momentum won’t last without reforms to address things like excessive bureaucracy and rising welfare costs.
France, meanwhile, finds itself in a deep political and fiscal mess — despite a strong third quarter that Finance Minister Roland Lescure described as “remarkable.”
Prime Minister Sebastien Lecornu is struggling to stabilise the budget and avoid being ousted by a divided parliament, like his two predecessors. Amid a spate of credit downgrades, central-bank governor Francois Villeroy de Galhau has warned of a “gradual suffocation” from the country’s incapacity to deal with rising debt.
“Despite political turbulence and international uncertainties, our businesses are investing, exporting, and driving the country forward,” Lescure said. “The swift adoption of a budget that preserves the confidence of businesses and households will be crucial to sustaining this momentum.”
For the eurozone, optimism remains. Separate releases Thursday revealed that economic confidence rose more than expected this month, while unemployment remained near a record low. Trade will continue to cast a shadow, however, despite July’s deal between Washington and Brussels reducing uncertainty.
ECB president Christine Lagarde said this month that the global economy is “yet to feel the pain” of higher US levies.
Uploaded by Magessan Varatharaja
