Euro area GDP growth slowed sharply in the second quarter of 2025, rising just 0.1 percent compared with 0.6 percent in the first quarter. On an annual basis, growth eased slightly to 1.4 percent from 1.5 percent in the previous quarter, signalling a loss of momentum amid a softer economic environment.

By contrast, the United States posted a stronger performance, with GDP expanding by 0.7 percent in the second quarter following a 0.1 percent contraction in the first quarter. Annual growth in the US held steady at 2.0 percent, maintaining a clear gap over the euro area.

The euro area's modest quarterly uptick reflects subdued domestic demand and lingering structural headwinds, while the US benefited from a rebound in activity after a weak start to the year. The divergence underscores differing economic trajectories between the two economies, with the euro area at risk of stagnation and the US demonstrating greater short-term resilience.

While the annual growth rate for the euro area remains positive, the second quarter slowdown suggests policymakers may face increasing pressure to address weak investment and consumption trends to prevent further deceleration. This latest update takes the RPI to minus 1 and the RPI-P to minus 3, meaning that economic activities are now within the expectations of the euro area economy.

The consensus sees no change in the second print for Eurozone GDP from a gain of 0.1 percent and 1.4 percent year on year in the first report for Q2. Growth has fallen back to earth in Q2 after an unusual boost from exports in Q1 when GDP rose 0.6 percent on the quarter.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. There are two preliminary estimates which are based on only partial data. The first is the preliminary flash, introduced in April 2016 and limited to just quarterly and annual growth statistics for the region as a whole. This is issued close to the end of the month immediately after the reference period. The second flash report, released about two weeks later, expands on the first to include growth figures for most member states but still provides no information on the GDP expenditure components.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Stock market Investors like to see healthy economic growth because robust business activity translates to higher corporate profits. The GDP report contains information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. These data, which follow the international classification system (SNA93), are readily comparable to other industrialized countries. GDP components such as consumer spending, business and residential investment illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.

Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.

Bond or fixed income markets are contrarians. They prefer weak growth so that there is less of a chance of higher central bank interest rates and inflation. When GDP growth is poor or negative it indicates anaemic or negative economic activity. Bond prices will rise and interest rates will fall. When growth is positive and good, interest rates will be higher and bond prices lower. Currency traders prefer healthy growth and higher interest rates. Both lead to increased demand for a local currency. However, inflationary pressures put pressure on a currency regardless of growth.