Economy in Brief

GDP in the European Monetary Union rose by 1.3% at an annual rate quarter-to-quarter in the fourth quarter of 2025. This is a step up from 1.1% in the third quarter and from 0.6% in the second quarter. Year-over-year growth in the monetary union slowed to 1.3% in the fourth quarter compared to 1.4% in the third quarter and 1.5% in the second quarter; however, GDP growth is holding up well, and the quarterly profile suggests that the current growth rate is solid.

Early-stage GDP reporters At this early stage, only seven countries have reported publicly GDP figures, and we see them in the table. Among them, the strongest growth rate in the fourth quarter is from Portugal at 3.2%, followed by Spain at 3.1%, and then the Netherlands at 2.1%; the weakest growth rate reported in the table is from France at 0.7% at an annual rate in Q4.

Quarterly acceleration/deceleration In the fourth quarter with GDP measured quarter to quarter, GDP has accelerated in the monetary union from 1.1% in Q3 to 1.3% in Q4. At the country level, there are accelerations in Germany, Italy, Portugal, and Spain; the Netherlands logs the same growth rate in Q3 as in Q4 at 2.1%. Belgium and France log slowdowns, with Belgian growth posting a 0.8% annual rate in Q4 compared to 1.0% in Q3 and with France at 0.7% in Q4 compared to 2.1% in Q3.

Year-on-year trends Year-over-year trends are different from this, however. On a year-over-year basis, the monetary union shows slightly slower growth at 1.3% in Q4 compared to 1.4% in Q3. Accelerating comparisons show Belgium, France, Germany, Italy, and the Netherlands all on rising growth rate profiles for year-on-year growth. Growth slows quarter-to-quarter in Portugal and in Spain.

Growth in historic context The year-on-year growth rate overall ranked on data back to 1997 shows only Italy and Portugal with rates of growth above their respective medians for the period (back to 1997). Italy's growth rate has a 55.4 percentile standing, the same as for Portugal. Spain’s 48.9 percentile standing places its growth rate near its median, while the other countries produce growth rates largely in the mid-30th to low 40th percentiles for this period.

Large economy/small economy Comparing growth rates for the largest four economies to the rest of the monetary union, we have the large economies growing stronger quarter-to-quarter in the fourth quarter of 2025 at 1.4% compared to 1.2%; this is a reversal of the pattern that we saw in Q3 and Q2. In fact, the year over year growth rates show the four largest economies growing slower than the rest of the monetary union, for the last four quarters. In the fourth quarter, they have a 40.2 percentile standing on growth rates back to 1997 while the rest of the monetary union comes in very close to its median growth rate with a percentile standing at 48.9%. It doesn't appear that any particular part of the monetary union is doing especially well, but the smaller countries appear to be closer to normal than the larger countries where growth remains more significantly challenged than it has been over the last 30 years.

In January, we see an uptick in the EU Commission indexes that chronicle conditions in the European Monetary Union. The overall index is up smartly to 99.4 in January from 97.2 in December with improvement in four of the five subindexes with construction being unchanged month-to-month and for three months in a row; construction is also the strongest sector among the five by a long shot. The top line EMU reading was last this strong in January 2023, two years ago, on an isolated reading. It was last stronger for a string of period March 2021 through February 2022, in the heat of the post-Covid revival, averaging 111.6 on that span and reaching a monthly value as high as 119.9.

Rank standings rise and firm The overall EU Commission index has the queue percentile standing at its 46.7 percentile, very close to the 50% mark that establishes the median for the series among the five components. Retailing and construction are both above their respective 50% marks, with retailing at a 56-percentile standing and construction at an 81.9 percentile standing. The weakest reading is on consumer confidence at a 26.6 percentile standing, while services have a 43.5 percentile standing with the industrial sector at a 43.4 percentile standing. Both the services and industrial readings are climbing up closer to their respective medians but not quite there yet.

Largest economies show the clearest turns All four of the largest economies showed monthly increases in January with the largest increase a 6.1% month-to-month increase by France; the smallest was a 1.3% increase by Italy. While that's good news, it's also true that all four of those readings had declined in December compared to November. For the rest of the countries of the Monetary Union, eight of those 14 countries experienced month-to-month setbacks to their overall confidence readings in January, but only 3 of those 14 countries had experienced contractions in December and only 3 of them had experienced contractions in November; and, in November, only one of the four largest economies had experienced contraction.

Generally, positive developments are afoot Generally speaking, the trends are moving in a positive direction despite monthly volatility across the 18 early reporting countries; 9 of them show queue percentile standings above the 50th percentile, 2 of those are among the four largest economies, Italy and Spain. Quite clearly conditions within the monetary union remain mixed but the upward momentum and recent improvement is unmistakable.

Sector performance in largest EMU economies Among the four largest economies, the industrial sector has an above 50 percentile ranking in France and in Spain. Germany, and Italy are lagging behind. Construction has above 50-percentile standing in each of the four largest economies except France where its percentile standing is in its 42nd percentile. Spain does not report consumer confidence, retailing, and services numbers separately. Among the remaining big three countries, only Italy has readings above its 50-percentile mark and those are only in retailing and services. Consumer confidence continues to lag everywhere with the highest assessment among the BIG-4 economies in Germany with the 45.8 percentile standing and the lowest in France at a 20.4 percentile standing.

Tracking improvement The chart at the top shows that in broad terms we can see the improvement is relatively long lived for the BIG-3 economies and in EMU. We can be hopeful that there really is a trend of improvement that is taking hold. From mid-2025 or so onward, there are steady improvements in gear. Two of the BIG-3 economies are improving along with the EMU aggregate; only Germany tends to flatline on that timeline. The recent improvement in Germany is a relatively new feature in what otherwise looks like German stability. These trends now have some length, making the momentum seem more durable.