Don’t write the Eurozone consumer off just yet

Eurozone growth in 2025 will rely on consumers. There were positive signs in H2 last year, with consumers starting to deploy their real income gains and the impact of lower rates feeding through. However, we don’t think solid H2 outturns signal a sustained increase in momentum. Instead, we expect spending growth to stabilise around the current pace, totalling 1.5% in 2025.

What you will learn:

• The key risk to spending growth stems from the labour market: employment remains steady but firms curtail hiring plans, and households’ fears of unemployment rise. This could trigger a build-up of precautionary savings.
• Tariffs will have moderate aggregate effects on consumer spending. The direct impact through higher prices will lower purchasing power. Indirect effects will mainly work through the labour market, with sectors hit by tariffs likely to shed jobs.
• The diverging economic performance of the Eurozone’s Big Four economies is largely driven by consumer spending. We expect a more synchronised pickup in 2025, but substantial gaps will remain, with Spain leading and Germany lagging.