Eurozone economy grows more than expected despite US tariff turmoil
The EU's official data agency said the 20-country single currency area recorded growth of 0.4 percent over the January-March period from the previous quarter.
The figure was higher than the 0.2 percent forecast by analysts for Bloomberg, and comes after the eurozone economy grew by 0.2 percent in the final quarter of 2024.
The 27-country European Union economy expanded by 0.3 percent, after 0.4 percent between October and December.
The better-than-expected data appears to be linked to advance purchases in the United States, before Trump's tariffs came into effect.
But for the year as a whole, the outlook remains lacklustre, according to experts.
Trump on April 2 slapped sweeping 20 percent levies on a majority of European goods before announcing a 90-day pause, but a worldwide 10-percent levy rate remains.
If Brussels and Washington fail to reach an agreement, the higher tariffs will kick in, unleashing chaos and a painful trade war for Europe.
But Trump's 25-percent tariffs on steel, aluminium and auto imports also remain.
"The economy started the year on a stronger footing than we expected and activity surveys suggested," said Franziska Palmas, senior Europe economist at London-based Capital Economics.
"Nevertheless, we still expect growth to slow sharply in the next six months as the US tariffs introduced in April will hit activity and any boost from German fiscal stimulus will mostly be felt next year," Palmas added.
Faster German expansion
Several European companies shipped a larger number of goods at the start of the year to avoid Trump's higher tariffs.
For example, Ireland's exports to the United States jumped 210 percent in February to nearly 13 billion euros ($14.8 billion), with 90 percent of those being pharmaceutical products and chemical ingredients.
The eurozone's strong performance in the first quarter "is partly due to the 3.2 percent q/q increase in GDP in Ireland, where GDP tends to be very volatile and the boost from front-running of US tariffs is likely to have been quite big", Palmas said.
Europe has been mired in stagnation for two years, held back especially by soaring energy costs following Russia's invasion of Ukraine in 2022.
The International Monetary Fund this month cut its annual growth forecast for the eurozone by 0.2 percentage points to 0.8 percent in 2025, as it expects trade tensions with the United States to hurt Europe.
Among the major economies, Spain stood out with growth of 0.6 percent in the first quarter compared to the previous three-month period.
But France, hampered by political instability and a planned austerity programme, weighed down the eurozone, with growth of only 0.1 percent between January and March.
Germany, Europe's biggest economy, also grew more than expected, by 0.2 percent in the first quarter of the year compared to the previous quarter.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
France 24
2 hours ago
- France 24
Trump admin announces plan to loosen power plant regulations
The move "would deliver savings to American families on electricity bills, and it will ensure that they have the electricity that they need today," Environmental Protection Agency (EPA) chief Lee Zeldin told a press conference, adding that his office would balance protecting the economy and the climate. Regulations set to be repealed include limitations on carbon dioxide emissions by power plants and a rule curbing release of hazardous air pollutants such as mercury. The measures were meant to reduce greenhouse gas emissions by the United States, the world's top polluter, and to protect people living near power plants and exposed to elevated levels of air pollutants that can damage the nervous system and harm breathing. The Trump administration argues the regulations are costly and rein in energy output at a time when the development of artificial intelligence is driving booming demand for electricity. A powerful polluter "No power plant will be allowed to emit more than they do today," Zeldin said Wednesday. The US power sector is already one of the world's top polluters, according to a recent report by the Institute for Policy Integrity, a nonpartisan think tank at New York University. Were it considered a country, it would have ranked as the world's sixth-biggest emitter in 2022 and contributed five percent of total worldwide emissions from 1990-2022, the institute said in a May briefing on the topic. "The best available evidence shows that each year of greenhouse gas emissions from US coal-fired and gas-fired power plants will contribute to climate damages responsible for thousands of US deaths and hundreds of billions in economics harms," the institute said in its report. Regulations facing the axe include requirements for coal-fired power plants to capture CO2 emissions instead of releasing them into the atmosphere, using expensive capture and storage techniques that are still not widely in use. A change in course Since Trump -- a proponent of fossil fuels and climate change skeptic -- returned to power in late January, federal authorities have reversed course on climate policy. In March, the EPA said it would undo dozens of environmental measures enacted during Biden's term in office, including those cutting vehicle emissions and drastically reducing the amount of carbon dioxide that coal-fired power plants can emit. The proposed federal rules announced Wednesday will be subject to a period of public comment before being finalized. If they become law, they would most likely be challenged in court.
Fashion Network
3 hours ago
- Fashion Network
French Senate approves ‘anti-fast-fashion' bill chiefly targeting Shein, Temu
Louwagie said that the government will notify the European Commission of this bill even before the end of the joint parliamentary committee work that will start soon, and that the government will also work on the decrees regulating the bill's application, and notably define the thresholds that will formally identify an operator as 'ultra-express' or 'ultra-fast-fashion'. Before the vote, the representatives of the various Senate groups spoke to explain their positions on the vote. An opportunity to underline for some the positive amendments made to the bill, and its weaknesses for others. Many senators welcomed the removal of a provision of the 2022 anti-waste law on unsold goods, which allowed ultra-fast-fashion operators to benefit from tax allowances when donating unsold goods to charitable associations. The re-introduction of a blanket ban on advertising for ultra-express fashion operators was also appreciated. 'This law does not prohibit, it protects by defining what is abnormal. It protects our environment and that of our children. It protects the economy and our textile industry. We can be happy we are giving ourselves the means to achieve our goals,' said Nicole Bonnefoy, representing the Socialist, Ecologist and Republican group, adding that 'we welcome the re-introduction of article three, which will form a negotiation basis for requesting an amendment to the European e-commerce directive, so that these restrictive measures can be made to apply to companies based for example in Ireland.' Although the amendments have been approved by the groups, several points still prompted strong reservations. The introduction of the term 'ultra-express fashion' has led to much teeth-gnashing among environmental associations and sustainable fashion brands, which believe that the aim of fencing in all types of fast-fashion practices is no longer being pursued. Jacques Fernique of Ecologist group Solidarité et territoires insisted on this aspect, emphasising that the various laws will not enter into force for many months yet, since they have to be examined again by the European Commission and the joint parliamentary committee, something which won't happen before the autumn. 'Today's vote is a relatively positive step. Shein, Temu and Amazon are pushing to the extreme a business model that destroys local jobs and our city centres' appeal. But both ultra-express fast fashion and fast fashion adopt the same approach, selling transient, low-cost disposable products. This bill is targeting the ultra-fast fashion explosion, but we can't see why the penalties shouldn't potentially apply to everyone.' Fernique is campaigning for provisions that would 'push back against the kind of disposable fashion sold by foreign platforms but also by French and European companies. It's sustainable fashion that we ought to promote, regardless of the nationality of who sells it.' An issue which the majority of senators did not endorse. 'This bill has set a course. It doesn't pretend to solve everything, but it intends to draw boundaries,' said Valente Le Hir, who is affiliated with the Republican group and is the bill's rapporteur in the Senate. She has advocated for the middle ground in various issues, asserting that the Senate wants to draw up a 'stronger bill, not a travesty of it. We have said it's time to limit the excesses of express fashion without penalising those who are working towards greater sustainability in the industry. [The bill] has distinguished, within a poorly understood sector, what constitutes planned overconsumption and what constitutes sustainable innovation. We've clarified the target. We've drawn a clear line between what we want to regulate, ultra-express fast fashion as embodied by platforms like Shein and Temu, and what we want to preserve, in other words affordable, locally rooted fashion that generates jobs in France, that anchors our communities, creates connections and boosts local industry.' After the government will have sent the text over to the European Commission, the latter will have three to four months to comment. And while French MPs and senators will be working within the joint parliamentary committee, the Commission's analysis and observations will play a key role in the bill's final wording and provisions. In the meantime, the lobbying efforts that have been ongoing for months are set to continue.
Fashion Network
3 hours ago
- Fashion Network
US clothes, toy prices show tariff impact only at margins so far
For all the hand-wringing about tariffs, Americans are so far experiencing limited inflation from President Donald Trump 's protectionist trade policy. For heavily imported goods like smartphones, new cars and clothing, price indexes are actually down since the Trump administration began implementing levies on key trade partners including China, based on data released Wednesday. Other categories including sporting goods and toys have risen only so much since February. Companies may be finding ways to shield consumers from higher costs as they fear prices hikes — after years of lingering inflation — could lead to a pullback in demand. Some firms stocked up on inventories ahead of tariffs, allowing them to maintain pricing discipline, while others are absorbing some of the extra costs at the expense of lower margins. Some may also be taking solace in Trump's decision to pause or lower some of the more punitive tariffs as the administration works toward trade agreements, which has bought companies some extra time to weigh price hikes. Still, most economists largely expect businesses to start passing more of the trade costs this summer, with Walmart Inc. and Ford Motor Co. among the firms that are warning higher prices for consumers are coming. The CPI report also showed bigger increases in some tariff-exposed categories. An index of toy prices rose by the most since 2023, while major appliances posted the largest advance in nearly five years. More broadly, the government's consumer price index report showed underlying inflation rose less than forecast for a fourth month in May. Goods costs, excluding the volatile food and energy categories, were flat compared with a month earlier. 'It is too early to declare victory and say that the significant increase in tariffs over the past few months will have no material impact on consumer price growth,' Wells Fargo & Co economists Sarah House, Michael Pugliese and Nicole Cervi wrote in a note after the report. 'Pre-tariff inventory building and anticipation that tariffs may eventually be dialed back are likely leading to some of the effects being delayed, and we see a particular risk of vehicle and apparel prices bouncing back in the near term,' they said. Lawrence Werther and Brendan Stuart, economists at Daiwa Capital Markets, also expect tariff-related price pressures to emerge in the next few months, but 'ongoing trade negotiations, along with anchored longer-term inflation expectations, point to a one-off (and relatively short-lived) shift.'
