The Cabinet Office released "World Economic Trends 2025 I," Chapter 1, Section 3, analyzing the economic developments in the Eurozone and the United Kingdom during the first quarter of 2025.
1. Eurozone Economic Developments The Eurozone showed signs of economic recovery in Q1 2025, with real GDP growth rate trending upward on a quarter-over-quarter basis. Private consumption recovered due to real wage improvements (up 0.9% year-over-year, with nominal wages at 3.3% and consumer prices at 2.3%). Real retail sales reached 101.9 in April 2025, confirming the consumption recovery.
However, the household savings rate remained elevated at 14.6% in Q4 2024, significantly above the 2016-19 average. The savings tendency reached an index of 28.5, 2.6 times the 2015-19 average (11.0), driven by uncertainty over U.S. policy directions and German political instability. The economic outlook diffusion index also continued to stagnate.
Capital investment showed recovery in Q1 2025, supported by declining policy interest rates and the resolution of policy uncertainty following the establishment of the German coalition government (CDU, CSU, SPD under the Merz administration). Defense-related investment is also expected through the European rearmament plan (150 billion euro loan facility).
Goods exports increased partly due to rush exports to the United States. Major export destinations include the United States (16.8%), the United Kingdom (10.1%), Poland (7.4%), and China (6.7%). By category, chemicals and basic pharmaceuticals (20.6%) led exports, with pharmaceutical exports remaining robust particularly due to Ireland's pharmaceutical industry cluster.
2. UK Economic Developments The UK has maintained positive real GDP growth since Q4 2023, showing economic recovery. Q1 2025 recorded 2.9% growth on an annualized quarter-over-quarter basis.
Private consumption recovered due to real wage improvements (Q1 2025: real wages up 1.7%, nominal wages 3.7%, consumer prices 3.7%), with strength across services, semi-durable goods, and durable goods. Real retail sales recovered to 95.5 in April 2025.
New vehicle registrations reached 84,000 units in February 2025, exceeding February 2019 levels (82,000 units), showing signs of recovery to pre-pandemic levels.
Consumer prices have decelerated significantly from their 2022 peak, approaching the Bank of England's target. Real wages have continued positive growth since Q2 2023.
Conclusion While both regions show consumption recovery supported by real wage improvements, the Eurozone faces high savings tendencies and policy uncertainties, while the UK confronts structural challenges. A return to autonomous growth trajectories is expected to take time in both regions.