Economists warn that the uptick remains too mild to signal the start of a sustained recovery.

BRUSSELS, Oct. 31 (Xinhua) -- The euro area economy expanded modestly by 0.2 percent quarter-on-quarter in the third quarter (Q3) of 2025, according to a preliminary flash estimate released Thursday by Eurostat.

The stronger-than-expected figure offered some relief, though economists warned that the uptick remains too mild to signal the start of a sustained recovery. Most analysts said further interest rate cuts are unlikely in the near term, though they could follow in 2026.

MODEST GROWTH

"Growth is better than expected, but far from impressive," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.

Bert Colijn, ING's chief economist for the Netherlands, attributed the stronger reading partly to a 0.5 percent expansion in France, where "investments and exports jumped, in part due to a strong aerospace sector, which tends to see volatile production."

He added that Spain's robust growth continued to outpace the eurozone average, though it eased from 0.8 percent in Q2 to 0.6 percent in Q3.

Sweden posted the strongest quarterly increase among EU members at 1.1 percent, followed by Portugal at 0.8 percent. Meanwhile, major euro area economies Germany and Italy recorded zero growth from the second to the third quarter of 2025.

Overall, the European Union (EU) economy grew by 0.3 percent during the period. On an annual basis, GDP rose by 1.3 percent in the euro area and 1.5 percent in the EU, according to Eurostat.

CAUTIOUS OUTLOOK

Despite the modest rebound, economists remain wary, stressing that the eurozone's recovery lacks clear momentum and that short-term prospects remain fragile.

Allen-Reynolds pointed to the European Commission's economic sentiment indicator released on Thursday, which climbed to an eight-month high of 96.8 in October but remained below its long-term average - suggesting only modest expansion in the fourth quarter.

Colijn echoed the caution, citing domestic risks such as tight government budgets and slow reforms, as well as external headwinds from a global slowdown and trade uncertainty.

He questioned whether France's strong GDP reading can be sustained and whether Germany will succeed in translating its stimulus plans into real growth.

"For those looking at this from a glass-half-full perspective, the eurozone has remained far from recession despite all the global and domestic turmoil. But the half-empty take would be that evidence of a real sustained growth acceleration on the back of extra investment promises is not there yet," Colijn added.

ECB IN WAIT-AND-SEE MODE

According to consulting firm Trading Economics, the better-than-expected GDP data eased pressure on the European Central Bank (ECB) to cut interest rates in the near term.

The ECB announced Thursday it would keep its key interest rates unchanged. Annual inflation in the eurozone edged up to 2.2 percent in September from 2 percent in August - broadly in line with the bank's medium-term target.

Economists noted that the ECB has adopted a cautious "wait-and-see" stance. "The bar for yet another rate cut from the ECB is high," said Carsten Brzeski, global head of macro at ING Research.

However, he added that if downside risks such as U.S. tariff impacts, a stronger euro, political uncertainty in France, or delays in Germany's fiscal stimulus materialize, the ECB could deliver one or two additional rate cuts.

Allen-Reynolds projected that growth will remain subdued in 2026 as inflation falls further below target, leading him to forecast two rate cuts next year.