Eurozone GDP Beats Forecasts: Portugal Emerges As Growth Leader
Oliver ScottThe eurozone posted slightly stronger-than-expected growth in the third quarter of 2025, offering a glimmer of resilience after months of sluggish momentum.
The eurozone posted slightly stronger-than-expected growth in the third quarter of 2025, offering a glimmer of resilience after months of sluggish momentum.
But beneath the surface, the recovery reveals widening disparities among member states, with Germany's industrial malaise continuing to weigh heavily on the bloc's overall performance.
Gross domestic product (GDP) in the eurozone increased by 0.2% quarter-on-quarter, according to preliminary estimates from Eurostat released on Thursday.
The modest uptick marked an improvement from the 0.1% recorded in the second quarter and edged past analyst expectations, which had forecast growth to remain unchanged.
Year-on-year, eurozone growth slowed to 1.3% from 1.5%, though it still came in slightly above the 1.2% economists had predicted. The broader European Union fared marginally better, expanding by 0.3% on the quarter and 1.5% from a year earlier.
Portugal leads the eurozone bloc
Among countries with available data, Portugal emerged as the top performer within the eurozone, with GDP rising by 0.8% on the quarter — driven by resilient domestic demand and tourism.
In the wider EU, Sweden led the scoreboard with 1.1% growth, followed by Czechia at 0.7%. At the other end of the spectrum, Lithuania contracted by 0.2%, while Ireland and Finland both posted 0.1% declines.
Germany's economy was stagnant in the third quarter, following a 0.2% contraction in the second quarter, driven by falling exports amid higher US trade tariffs.
"The economy of the eurozone continues to edge forward rather than slip into contraction," said Joe Nellis, professor of economics at Cranfield University and economic adviser to MHA.
Nellis highlighted that consumer demand showed tentative improvement in the third quarter, helped by easing inflation and slightly higher wages, which offered some relief for households. The services sector held up, but manufacturing and exports continued to underperform, weighed down by weak global demand and lingering cost pressures.
"The eurozone is managing to grow, but very slowly," Nellis added, pointing to Germany and France's continued underperformance as a major drag on the bloc.
The eurozone's two largest economies, he said, "continue to vie for the unenviable title of 'the sick man of Europe'".
Market reactions muted ahead of ECB decision
Markets responded cautiously to the GDP release, as sentiment remained tethered to central bank moves.
European equities dipped slightly on Thursday, mirroring a broader pullback after Fed Chair Jerome Powell struck a more hawkish tone than expected following the US central bank's 25-basis-point rate cut on Wednesday.
Powell pushed back against market expectations for another interest rate cut in December, stating that it's "far from being a foregone conclusion".
The EURO STOXX 50 was down 0.39%, with Spain's IBEX 35 falling 1.14% and Italy's FTSE MIB dropping 0.80%. France's CAC 40 was 0.64% lower, while the German DAX index edged down 0.11%.
In corporate news, ING Groep jumped 4.63% after posting better-than-expected quarterly earnings, while Airbus rose 2.06% on a beat in estimates.
On the downside, Schneider Electric shares fell 4.06%, after the French industrial group slightly revised its 2025 targets despite solid quarterly revenue growth.
Attention now shifts to the European Central Bank (ECB), which is widely expected to leave interest rates unchanged at its policy meeting on Thursday.
It would be the third consecutive hold, as the ECB balances signs of resilience with ongoing disinflation and sluggish growth.
The main refinancing rate is expected to remain at 2.15%, and the deposit facility rate at 2.0%.
