Euro area GDP growth revised higher in the fourth quarter

The Eurozone economy expanded by 0.2% quarter-on-quarter in Q4 2024, a slight improvement from the previous estimate of 0.1%, maintaining the same growth pace as in Q3.

Euro area GDP growth revised higher in the fourth quarter

The biggest driver of growth was household spending, which increased by 0.6%, supported by easing inflationary pressures and stable wage growth. Government expenditure also contributed positively, rising 0.9%, while investment picked up by 0.6%, reflecting resilient business activity despite elevated interest rates. Meanwhile, trade remained a drag on growth, with both exports and imports edging down by 0.1%, as weaker global demand and trade tensions weighed on external sector performance. Additionally, inventory reductions subtracted 0.2 percentage points from GDP growth, signaling that firms were cautious about overstocking amid lingering economic uncertainties.

Countries performance

The bloc's two largest economies, Germany and France, contracted, with Germany’s GDP shrinking by 0.2% and France’s by 0.1%, as high borrowing costs and weaker industrial activity dampened economic output. Italy, however, managed to grow by 0.1%, improving from a flat reading in the prior estimate. Ireland delivered a strong upside surprise, reporting a 3.6% GDP expansion, a sharp revision from the initial estimate of a 1.3% decline, likely driven by the multinational-dominated pharmaceutical and tech sectors. On the downside, Austria’s GDP contracted by 0.4% (compared to the initial estimate of no change), Finland’s shrank by 0.2% (revised down from a 0.1% gain), and Malta saw a steeper-than-expected decline of 0.7%. Latvia’s economy stagnated. In contrast, several Eurozone economies posted solid growth, with Portugal (1.5%), Greece (0.9%), and Spain (0.8%) leading the gains, supported by strong tourism and domestic demand. Lithuania (0.8%), Estonia (0.7%), Slovenia (0.6%), Slovakia (0.5%), and Cyprus (0.3%) also recorded positive expansions, highlighting pockets of resilience within the bloc.

Eurozone faces a mixed outlook

Looking ahead, the Eurozone faces a mixed outlook, with some economies benefiting from consumer resilience and public investment, while others struggle with weak industrial performance and external headwinds. The European Central Bank’s monetary policy decisions and fiscal measures across member states will be key factors in shaping growth trajectories in the coming quarters.