Eurozone Growth Stagnates as Inflation Climbs to 3% Amid Middle East Conflict

The eurozone grew by 0.1% in the first quarter, while inflation jumped to 3% in April driven by a near-11% surge in energy prices.

The EU also expanded by 0.1% between January and March, according to a flash estimate published by Eurostat. In the fourth quarter of 2025, GDP increased by 0.2% in both areas.

Germany, Europe’s largest economy, grew by 0.3%, while France showed zero growth, Italy expanded by 0.2%, and Spain managed 0.6% growth. Among member states, Finland (+0.9%) recorded the highest increase, followed by Hungary (+0.8%), Estonia and Spain (+0.6%). Declines were recorded in Ireland (-2.0%), Lithuania (-0.4%) and Sweden (-0.2%).

Separate data showed inflation rose to 3% this month, from 2.6% in March. Energy is estimated to have the highest annual rate in April (10.9%), followed by services (3.0%), food, alcohol & tobacco (2.5%) and non-energy industrial goods (0.8%).

China’s factories increased production for a second month in April to ship goods early to buyers worried the Iran war will drive up costs, with new export orders at their highest level in two years. The official purchasing managers’ index for manufacturing dipped to 50.3 from 50.4 in March, but held above the 50 mark that separates growth from contraction.

Germany’s economy surprised with 0.3% growth in the first three months of the year, defying the adverse impact of the Iran war. The Federal Statistical Office (Destatis) reported that both household and government spending were higher than in the previous quarter, while exports also rose. However, experts warn that the war in the Middle East and soaring energy prices, combined with a lack of structural reform, do not bode well for Germany’s growth outlook.

The Irish energy distributor DCC has rejected a £4.95bn takeover proposal from US private equity groups KKR and Energy Capital Partners, saying it undervalued the company. Shares in the London-listed company fell 5.1% to £55.80.

In Germany, unemployment rose more than expected in April, above the 3 million mark, with the jobless figure increasing by 20,000.

Air France-KLM has reported a smaller first-quarter loss than expected, but is scaling back capacity because of the US-Israeli war with Iran and soaring jet fuel costs. The carrier expects its fuel bill to rise by $2.4bn this year and is limiting discretionary spending.

France’s economy did not grow at all during the first quarter, with households spending less and a slump in exports. Meanwhile, Spain’s economic growth slowed to 0.6% in the first quarter from 0.8% in the previous quarter.

Premier Inn owner Whitbread is to cut about 3,800 jobs in the UK and Ireland as it resets its five-year business strategy, following tax rises and pressure from a US activist investor. The cuts will affect about 12% of its 30,000-strong workforce, primarily in its Beefeater and Brewers Fayre restaurants.