Concerns over the stability of the Eurozone’s economic recovery are mounting as consumer confidence in the region plummets to its lowest point in 18 months, reflecting growing anxiety over the impact of global trade tensions.
According to the European Commission’s latest flash estimate, consumer confidence in the euro area fell by 2.2 percentage points in April, dropping to -16.7. This is the lowest level since late 2022 and marks the second consecutive month of decline. The broader European Union also saw a 2.1-point drop, with the confidence indicator now well below its long-term average. This signals a weakening sentiment just as the region is facing multiple external shocks.
The decline in consumer confidence comes amid escalating global trade restrictions, particularly from the United States. Since February, the US has imposed a series of tariffs on major trade partners, including a near-universal application of duties on April 2nd. These actions have triggered market volatility, leading to significant declines in stock markets and rising bond yields. In its April World Economic Outlook, the International Monetary Fund (IMF) revised its global growth forecast for 2024, cutting it to 2.8% from 3.3%, citing trade policy uncertainty and diminished productivity.
The IMF predicts the United States will experience only 1.8% growth in 2025, a sharp downgrade from the 2.7% previously forecast in January.
“For the United States, the tariffs represent a supply shock,” said IMF Chief Economist Pierre-Olivier Gourinchas. “That reduces productivity and output permanently and increases price pressures temporarily.”
Growth in the eurozone is also projected to remain sluggish, with expectations of only 0.8% growth in 2025, a 0.2 percentage point decrease from January’s projections. However, growth is expected to slightly improve to 1.2% in 2026.
Although all major eurozone economies have seen downward revisions in their growth forecasts, Spain stands out, with a revised growth estimate of 2.5% in 2025, an upward revision of 0.2 percentage points from January’s outlook.
“We must remain flexible and data-dependent to the extreme,” said ECB President Christine Lagarde in an interview with CNBC on Tuesday. “Either we cut or pause, but our decisions will be shaped by incoming data.”
Last week, the European Central Bank (ECB) lowered its deposit rate by 25 basis points to 2.25%, marking the first rate cut in over a year. Markets are now anticipating three additional rate cuts by the end of the year as policymakers work to stimulate demand without triggering further inflation.
Lagarde also stressed the importance of reducing internal trade barriers within Europe to mitigate the impact of external pressures, emphasizing that tariffs are hindering growth. Despite the economic challenges, Lagarde pushed back against concerns of a potential eurozone recession.
