According to Eurostat, Ireland topped the Eurozone’s GDP table, with a quarterly growth of 2.0%. Cyprus and Lithuania joined Ireland in the top three, with their economies seeing growth of 1.0% and 1.1%, respectively. In contrast, Italy’s economy stalled, and Latvia’s GDP contracted by 0.4%.
The GDP numbers provided some optimism, and the labor market data could also ease immediate concerns about private consumption and the economic outlook.
Employment across the Eurozone increased by 0.2% quarter-on-quarter in Q3 2024 after a 0.2% rise in Q2 2024. However, the employment data may offer short-lived comfort if Trump imposes tariffs on Eurozone goods. Tariffs on Eurozone goods could dampen demand, weaken the labor market, and curb private consumption, which accounts for over 50% of the Eurozone GDP.
US Tariff Threats Remain a Significant Economic Headwind for the Eurozone
Despite the pickup in economic activity, potential US tariffs could significantly impact the Eurozone’s economic recovery. Tariffs may target the Eurozone’s auto sector and potentially luxury brands.
Daniel Kral, European Macro Specialist at Oxford Economics, highlighted the vulnerability of the Eurozone’s all-important car industry, stating:
“The EU (and especially German) car industry is squeezed between dwindling sales and excess capacity in China, a protectionist US, and tighter climate regulations at home. It will enter a world of pain if the incoming US administration imposes sizeable tariffs.”
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