The upcoming European business surveys for June will provide further insights into the eurozone’s economic health. Current indicators suggest that external demand for eurozone exports remains lackluster, which could slightly dampen the GDP growth rate in Q2 2025. However, the significant increase in US tariffs is more likely to result in weak overall demand rather than a sharp decline.
Key Points
External Demand: The main indicators show that external demand for eurozone exports remains sluggish. This could slightly weaken the GDP growth rate in the second quarter of 2025.
Tariff Impact: The impact of a significant increase in US tariffs is more likely to lead to weak overall demand rather than a sharp decline. The indicators provided by the European Commission and the Ifo Institute have the highest correlation with export growth.
Survey Data: The June reports from the European Commission and the Ifo Institute will be released on June 27 and June 25, respectively. Survey data for May shows a slight improvement compared to April, following a sharp increase in March and a subsequent drop in April.
Fluctuations: These fluctuations are mainly related to preemptive hoarding activities in the United States.
Growth Outlook: The prediction model indicates that the impact of weak external demand on economic growth will be relatively mild. However, after growing by 0.6% in the first quarter of 2025, the eurozone economy may stagnate in the second quarter.
Detailed Analysis
European Commission and Ifo Institute Reports: The June reports from these institutions will provide crucial data on export growth. The European Commission’s report will be released on June 27, while the Ifo Institute’s report will be released on June 25. Both reports are expected to shed light on the current state of external demand.
May Survey Data: The survey data for May indicates a slight improvement in the economic situation compared to April. This follows a sharp increase in exports in March, which was followed by a significant drop in April. The fluctuations are attributed to preemptive hoarding activities in the United States.
GDP Growth: The prediction model suggests that the impact of weak external demand on economic growth will be relatively mild. However, the eurozone economy, which grew by 0.6% in the first quarter of 2025, may stagnate in the second quarter.
Conclusion
While external demand for eurozone exports remains weak, the impact of US tariffs is expected to result in weak overall demand rather than a sharp decline. The upcoming reports from the European Commission and the Ifo Institute will provide further clarity on the economic outlook. Despite these challenges, the eurozone economy is expected to experience mild growth, with the potential for stagnation in the second quarter of 2025.
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