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The Eurozone Remains Stuck In A Slump

Although private sector economic activity in the euro area fell in the last four months of last year, it started somewhat better in 2025.

By EC Invest

Initial surveys show a very slight increase in the private sector in January. While manufacturing output remained in deep red, service sector activity has grown sufficiently to allow overall activity to expand. This slight improvement in January does not change the overall cyclical situation of the euro area.

The European industry remains in a deep crisis. Plant closures and restructuring are increasing in most countries sharing a single currency. The loss of industrial jobs concerns households, consequently limiting their consumption. And it is the whole economic activity that is penalised. In 2025, GDP growth will remain low in the euro area, around 1%.

Germany in doubt

The Zew index, which measures the sentiment of 350 financial and economic analysts regarding Germany, declined in January. Analysts are not confident about the economic trend in the coming months.

The German economy is uncertain due to the industrial crisis, threats to international trade, and a few weeks before high-risk federal elections. This uncertainty is fueling the anxiety of German households, who are thus slowing down their consumption spending and delaying their housing projects. This national and international political fog is also penalising business investment.

While economic activity in Germany fell in 2024 for the second consecutive year, it is still urgent to revive the economic machine under threat of seeing Germany completely off track compared to other major economies globally.

The German economic woes are also weakening the euro area, especially those neighbouring countries with strong trade links with Germany.

European stocks are not currently part of our portfolio, but the Eurozone is represented in bonds.

ECI EUROZONE+GERMANY Remains Stuck GRAPHIC 920x320

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