E.U. GDP Crawls to a Halt, Raising Fears About Economic Momentum

Europe’s economic engine slowed sharply this spring, with fresh Eurostat figures showing GDP up just 0.2% across the European Union and 0.1% in the eurozone for the second quarter of 2025.

The annual pace—1.4% for the eurozone—signals progress has cooled since earlier this year. Country differences shape the story. Spain’s economy grew 0.7%, while Germany and Italy both slipped by 0.1%.

France did slightly better, rising 0.3%. These numbers reveal that while some southern economies are rallying, Europe’s big manufacturers are still feeling the weight of sluggish demand and global trade headwinds.

European inflation edged up to 2% in June, matching the European Central Bank’s target. This has kept the ECB holding interest rates steady, avoiding any sharp moves that might spook markets.

While price rises seemed contained, energy and services are still pushing overall costs higher. Consumer confidence nudged upwards but remains firmly in negative territory.

July’s indicator of -14.7, while better than before, shows people are still cautious about spending and worried about the wider economic outlook.

One positive comes from factories. EU industrial production jumped 1.5% in May compared to the prior month, helping to soften the weak growth.

Annual industrial growth reached 3.4%, driven by gains in energy and capital goods. But demand for cars and machinery remains muted as global uncertainty and trade conflicts hang over exports.

Behind the headline, the main picture is of an economy playing defense. Exports and industry provided just enough strength to keep growth positive, offsetting weaker spots in German and Italian output.

The recent trade agreement with the US also helped ease worries for Europe’s exporters, at least temporarily. For investors and businesses worldwide, the key takeaway is clear.

Europe avoided a recession, but its growth is limited, and the differences across member states are growing. Stable inflation and cautious central bankers give some support, but until industry and trade pick up more sharply, Europe’s recovery will stay slow and uneven.

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