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Europe’s Q2 Growth Diverges Under U.S. Tariff Hikes

Fragile stock-driven gains in France with a minimal eurozone uptick have prompted cuts to 2025 growth forecasts.

Le Premier ministre socialiste espagnol Pedro Sánchez, lors d'une allocution devant le Parlement à Madrid le 26 mars 2023
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Deuxième économie de la zone euro, l’Hexagone est la première à dévoiler comment son produit intérieur brut a évolué entre avril et juin.
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Overview

  • Spain’s economy expanded 0.7% in Q2, outpacing forecasts as exports grew 1.1% and business investment jumped 2.1%, supported by only 5% of its exports going to the U.S.
  • France posted a 0.3% GDP gain led by inventory accumulation (0.5 percentage point) and a modest rebound in household consumption (+0.1%), beating Insee’s 0.2% forecast.
  • Germany slipped back with a 0.1% contraction driven by weaker construction investment, highlighting ongoing challenges for its export-dependent industrial sector.
  • The eurozone’s GDP inched up just 0.1%, the weakest expansion this year, as strong growth in Spain and Portugal was offset by declines in Germany, Ireland and Italy.
  • An EUU.S. deal will lift U.S. duties to 15% on European imports from August 1, contributing to Insee and Banque de France cutting their 2025 growth outlooks to around 0.6%.