Euro Zone Ends 2025 on Steadier Footing as Retail Sales and German Industry Improve

The euro zone economy showed fresh signs of resilience at the end of 2025, with retail sales outperforming expectations and German industrial activity picking up, according to data released on Friday. Retail sales across the bloc rose 0.2% in November, slightly above forecasts, while annual growth of 2.3% was driven by strong upward revisions to earlier data. Spain continued to outperform peers, while France also posted above-trend growth, even as Germany lagged behind the regional average.

Despite lingering global trade disruptions, the euro zone grew faster in 2025 than many economists had anticipated, suggesting households and businesses are adapting to economic shocks. Analysts noted that inflation hovering around 2% has created a favourable environment, aligning with the European Central Bank’s policy goals. While the ECB has already delivered multiple rate cuts to support growth, economists expect further easing to be limited as the recovery remains modest rather than robust.

Germany’s industrial sector offered cautious optimism, with output rising 0.8% month-on-month and industrial orders surging 5.6%, boosted by large contracts. Government plans to ramp up spending on defence, infrastructure and housing are expected to further lift confidence and growth into 2026. However, exports remain a weak spot, particularly shipments to the United States, which fell sharply after new tariffs were imposed, dragging German exports down by 2.5% in November and reducing the country’s trade surplus.

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