Among the 20-member currency bloc, only 3 nations reporting thus far (Lithuania, Ireland and Finland) contracted on a quarter-over-quarter basis.[v]<\/a> Now, GDP has its limits like any other economic indicator. For example, the multinational tech and pharmaceutical firms headquartered in Ireland can hugely distort the Emerald Isle\u2019s GDP. Those global companies\u2019 accounting moves can skew exports, overshadowing domestic developments. But overall, Q3 GDP data indicate most eurozone economies are plodding along despite the uncertain global trade environment.<\/p>\n On the Big Two<\/p>\n France, the eurozone\u2019s second-largest economy, delivered the biggest surprise after GDP grew 0.5% q\/q (2.0% annualized), beating expectations of 0.2% q\/q.[vi]<\/a> Net trade (exports minus imports) was the biggest contributor, adding 0.9 percentage point to growth, though this isn\u2019t necessarily all positive. Though exports jumped 2.2% q\/q, imports slipped -0.4%.[vii]<\/a> Based on GDP\u2019s calculations, trade added more to France\u2019s headline growth, but imports represent domestic demand\u2014so its contraction isn\u2019t anything to cheer. And this follows a rather big uptick in Q2 imports (1.4% q\/q), so it may be a matter of importers fearing tariff effects then, leaving a pothole behind. Imports aside, other domestic demand measures pointed positively. Household consumption grew 0.1% q\/q, repeating Q2\u2019s pace, and gross fixed capital formation accelerated from 0.0% to 0.4%, led by investment in services (excluding construction).[viii]<\/a><\/p>\n Now, Q3 GDP activity occurred before France\u2019s politically volatile October, so it is possible last month\u2019s theatrics discouraged some spending or investment. But French political uncertainty has persisted since President Emmanuel Macron called a snap election in June 2024. Back then, experts worried uncertainty would hit growth<\/a>. Yet from Q2 2024 \u2013 Q3 2025, French GDP contracted just once in six quarters\u2014political instability hasn\u2019t roiled French output.[ix]<\/a><\/p>\n On the flipside, German GDP\u2014the eurozone\u2019s largest\u2014was unchanged in Q3. As we pointed out back in August<\/a>, German GDP has been bumpy since 2022, including a three-quarter contraction from Q4 2023 \u2013 Q2 2024.[x]<\/a> Q3\u2019s results extend that longer-running trend. But the lackluster result has likely disappointed those who thought new Chancellor Friedrich Merz\u2019s public investment plan would turbocharge growth.<\/p>\n We had doubts about that from the onset, as public spending usually takes a while to reach the economy (if it does at all). For instance, Germany just approved its 2025 budget in September, and the government is still identifying which infrastructure investments to pursue.[xi]<\/a> By the time it does, clears necessary approvals and breaks ground, we could see an entirely different economic backdrop. The government hasn\u2019t even decided how or whether to subsidize German heavy industry\u2019s electricity costs, despite debating it since 2023 and politicians\u2019 broad agreement some measures need to be taken\u2014and this doesn\u2019t even face permitting issues or construction hurdles. To be clear, we don\u2019t think the German economy needs a government lifeline\u2014growth is more resilient than many think (with its overlooked services sector offsetting industrial weakness<\/a>). But it is a useful reminder that politicians\u2019 pledges to boost the economy should be taken with a grain of salt\u2014the effects aren\u2019t as big and timely as many hope (or fear).\u00a0 \u00a0<\/p>\n Inflation Is Normal. Period.<\/p>\n As many speculate about the European Central Bank\u2019s (ECB\u2019s) next move, eurozone consumer prices rose 2.1% y\/y in October, slowing from September\u2019s 2.2%.[xii]<\/a> Among the underlying components, only services price growth accelerated (from 3.2% y\/y to 3.4%)\u2014all other main categories slowed.[xiii]<\/a> Some commentators fretted over the acceleration in services prices, worrying higher prices could spill into the rest of the economy.<\/p>\n Yes, services prices have risen more quickly than goods prices lately\u2014and have been stubbornly rangebound between 3.0% y\/y and 4.0% since January 2024.[xiv]<\/a> But even after October\u2019s uptick, services inflation remains more than half a percentage point from April\u2019s 4.0%.[xv]<\/a> Don\u2019t overstate monthly bounciness. Taking a step back, the latest price data confirm eurozone inflation isn\u2019t just returning to normal\u2014it is back to normal. (Exhibit 1)<\/p>\n Exhibit 1: Eurozone Inflation Is Back to Normal<\/p>\n Source: FactSet, as of 11\/3\/2025. Year-over-year change in Harmonized Index of Consumer Prices (HICP) for the eurozone, Germany, France, Italy and Spain, October 2020 \u2013 October 2025. \u201cEurozone Long-Term Average\u201d based on monthly year-over-year change in the eurozone\u2019s HICP from October 2005 \u2013 December 2019 (to remove pandemic-driven skew).<\/p>\n Now, forward-looking markets pre-priced this economic resilience months ago, but the official data are confirming a better-than-appreciated reality\u2014one of the contributors to budding optimism in the more-dour environment beyond America\u2019s borders.<\/p>\n [i]<\/a> Source: Eurostat, as of 11\/3\/2025.<\/p>\n [iii]<\/a> Source: Eurostat, as of 10\/31\/2025.<\/p>\n [iv]<\/a> Source: Destatis, as of 10\/30\/2025.<\/p>\n [v]<\/a> See note i. On an annualized basis, 4 out of 10 reporting eurozone members contracted (Ireland, Italy, Lithuania and Finland).<\/p>\n<\/p>\n