Consumer confidence in the Eurozone took a notable downturn in April, highlighting growing economic uncertainty and raising concerns about the region's much-anticipated consumption-led recovery in 2025. The latest flash estimate, released today, shows consumer sentiment falling to -16.7, down from -14.5 in March and significantly below the consensus forecast of -15.5.
This is the first major economic indicator to reflect the impact of the recent "Liberation Day" tariff announcements, which have ignited renewed trade tensions, particularly with the United States. The drop in consumer confidence underscores a shift in sentiment that could reverberate through both household spending and business investment in the months ahead.
'Consumer confidence for April is the first economic figure reflecting the impact of the "Liberation Day" tariff announcements. And it is bad. The flash estimate fell to -16.7 in April from -14.5 in March, clearly below the -15.5 consensus expectation,' ING stated.
While consumer confidence does not directly correlate with household consumption, given its higher volatility, it remains a critical gauge of public sentiment and willingness to spend. Analysts at ING warn that the current environment of heightened uncertainty may lead to a rise in household savings and a delay in large purchases, potentially derailing the European Central Bank's (ECB) projected consumption growth trajectory.
'In the March ECB staff economic projections, consumption growth was expected to accelerate to 1.4% this year, supported by higher real incomes and a decline in the household saving rate from the still elevated levels. In the current circumstances the reverse might happen, namely that in the wake of high uncertainty, consumers increase their savings and delay big-ticket purchases. So the consumption-led recovery story might start losing traction rapidly,' the analysis notes.
Beyond consumption, the broader economic outlook may also be weighed down by declining business investment and the direct fallout from trade tariffs. Even in a best-case scenario, assuming US import tariffs remain capped at 10%, ING economists estimate these measures could reduce Eurozone GDP growth by 0.1 percentage points in 2025.
The forecast for overall GDP growth has accordingly been revised downward, with ING now projecting economic stagnation in both the second and third quarters of 2025. Annual GDP growth for the Eurozone is now expected to register a modest 0.5%.
'Bottom line is that we see GDP stagnating in the second and the third quarter, with overall GDP growth for 2025 at 0.5%,' the report concludes.
The latest figures arrive at a critical juncture for policymakers and markets alike, as they weigh the implications of international trade dynamics and shifting consumer sentiment on an already fragile recovery.
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