As we gaze into 2025, the Eurozone consumer is poised to play a pivotal role in driving growth. Recent signs from the second half of last year illuminate a shift, as consumers began to unleash their accumulated real income gains amid declining interest rates. Yet, while the latter part of the year showcased positive trends, a sustained surge in spending momentum is unlikely. Spending growth is expected to taper and ultimately stabilise at around 1.5% by 2025.
A significant concern looms over spending growth, rooted in the labour market’s fate. Although employment levels remain stable, firms are increasingly hesitant to expand their hiring, giving rise to widespread fears of job losses among households. These anxieties may lead to a rise in precautionary savings as consumers brace themselves for potential financial strain.
The impact of tariffs on consumer spending is expected to be moderate overall. While direct effects from higher prices may dampen purchasing power, indirect repercussions are likely to surface through the labour market, particularly in sectors adversely affected by tariffs that could face job losses.
The Eurozone’s Big Four economies reveal a varied economic performance largely influenced by consumer behaviour. A more synchronised recovery in 2025 is foreseen, though pronounced disparities will persist, with Spain expected to show greater growth while Germany trails behind.
The Eurozone consumer will be crucial for growth in 2025, with signs of increased spending in late 2022, but overall, growth is expected to stabilise at 1.5%. Labour market concerns and the impact of tariffs pose risks to consumer spending. The Eurozone’s Big Four economies will experience various recoveries, with Spain leading and Germany lagging.
In summary, the Eurozone consumer should not be underestimated as we approach 2025. While recent trends hint at growth potential, caution is necessary given the lingering uncertainties within the labour market and the effects of tariffs. Despite the expected stabilisation of spending growth, considerable disparities between major economies indicate a complex recovery landscape.
Original Source: www.oxfordeconomics.com
