Eurozone Q4 GDP unexpectedly revised up, which may support the European Central Bank in slowing down the pace of interest rate cuts

According to Zhitong Finance APP, supported by consumer spending and business investment, the Eurozone's economic growth at the end of last year exceeded initial expectations. Data released on Friday showed that the final quarterly GDP growth rate for the Eurozone in the fourth quarter was revised up to 0.2%, higher than the initial estimate and the expected 0.1%. In the fourth quarter of last year, both exports and imports fell by 0.1%. Private consumption, government spending, and investment all increased, but were significantly weaker than in the previous three months.

However, this indicates a clear slowdown in growth momentum, highlighting that the region is affected by domestic and international uncertainties. Political turmoil in Germany and France, the two largest countries, has even impacted sentiment before U.S. President Trump's re-election. Trump's ongoing threats on trade issues and his unpredictable influence on the global political landscape suggest that more troubles lie ahead.

The European Central Bank updated its economic growth forecasts on Thursday, lowering the growth expectations for this year and next to 0.9% and 1.2%, respectively. The report pointed out that weak exports and continued poor investment performance are partly due to tariff disputes and the difficulty in assessing Trump's policies.

On Thursday, the European Central Bank also cut interest rates by 25 basis points, and sources indicate that this may be the last time officials directly cut rates as they prepare for difficult negotiations on how to proceed at the April meeting.

Wage growth in the Eurozone slowed in the fourth quarter, leading to beliefs that inflation will continue to ease. Data released by the European Central Bank on Friday showed that average employee compensation increased by 4.1% year-on-year, down from 4.5% in the same period last year. Additionally, the EU statistics office reported that employment growth in the fourth quarter slowed to 0.1%, down from 0.2% in the previous three months.

Although European Central Bank President Christine Lagarde stated on Thursday that the 2% inflation target would not be achieved until early 2026, the European Central Bank still believes that the anti-inflation process is "proceeding smoothly." The closely watched services inflation (in which worker wages play an important role) has already shown a decline in February.

This largely depends on whether the plans of European governments to fund large-scale defense investments (including infrastructure investments in Germany) in response to the sudden shift in U.S. foreign policy can make progress