Euro zone ends the year with steady growth as retail sales and German industry pick up

The euro zone closed a turbulent year with signs of steady, low-key growth. Fresh data shows that retail sales improved in November and German industry gained momentum, suggesting that the region is holding its ground despite ongoing global pressures.

Retail sales across the currency bloc rose 0.2% from the previous month. The year-on-year increase was more striking at 2.3%, helped by a sharp upward revision of October figures. Germany, the region’s largest economy, lagged the average pace, while Spain and France moved ahead with stronger consumer activity.

Oxford Economics noted that the euro zone remains subdued but stable, as inflation settles close to 2%. This level keeps the European Central Bank comfortable after two years of gradual rate cuts. Even so, expectations for further action from the ECB remain low.

German industry finds some relief

Germany has struggled to break out of stagnation, but November’s industrial numbers offered a lift. Industrial output rose 0.8% from the previous month, twice what analysts expected. Orders climbed 5.6%, boosted by large contracts that helped ease concerns about the sector’s softness.

Plans by the German government to raise spending on defence and infrastructure appear to be supporting confidence. Economists expect this fiscal push to add roughly 0.4 percentage points to GDP. Residential construction is also set for a rebound as lower interest rates, quicker approvals, and a growing housing shortage create new activity.

Overall euro zone growth is expected to pick up through this year and finish 2026 on a more positive note, with fiscal spending across the region helping lift demand.

Export weakness still weighs on Germany

The main drag on Germany remains exports. Sales abroad fell 2.5% in November from October, pulling the trade surplus down to 13.1 billion euros from 17.2 billion euros. Shipments to the United States dropped sharply down 22.9% from a year earlier after Washington imposed tariffs on a wide range of European goods.

The mixed picture shows an economy adjusting to global trade disruptions while relying more on domestic demand. For now, the euro zone appears to be moving through its challenges with steady, if modest, progress.