Euro zone economy expands by better-than-expected 0.4% in the first quarter

The euro zone economy expanded by a stronger-than-expected 0.4% in the first quarter, according to flash data from statistics agency Eurostat. This marks a notable improvement from the 0.2% growth print in the last quarter of 2024, and exceeds economists' forecasts of a 0.2% expansion. Despite the positive growth print, the euro zone economy has been plagued by lackluster growth for much of 2023 and 2024. The European Central Bank (ECB) has been cutting interest rates in an effort to stimulate growth and boost economic activity, with its deposit facility rate being taken down to 2.25% earlier this month - down from highs of 4% in mid-2023. The ECB has forecasted that the euro zone economy will grow by 0.9% in 2025, slightly below its January forecast. Fresh projections are due out in June, with central bank policymakers suggesting that these forecasts will prove crucial in the rate decision-making process. On the sidelines of the International Monetary Fund World Bank Spring meetings, policymakers and economists widely noted the US's tariff policy as a key concern when it comes to growth. ECB President Christine Lagarde noted that while the "disinflationary process is so much on track that we are nearing completion," there were shocks that would "dampen" the gross domestic product. The tariff tensions cast a shadow over the euro zone's growth prospects, with many economists warning that the uncertainty could lead to a slowdown in economic activity. However, the stronger-than-expected first-quarter growth print provides some relief and suggests that the euro zone economy may be more resilient to the tariff tensions than previously thought.