Leading Economic Index for the European Area Declined in March

Rising trade tensions ‘will likely lower euro area growth by dampening exports,’ said an official from the European Central Bank.

Members of the European Parliament take a vote during a plenary session at the European Parliament in Strasbourg, France, on March 12, 2025. Frederick Florin / AFP via Getty Images

The Conference Board Leading Economic Index (LEI) fell by 0.4 percent in March for the euro area, continuing the declining trend from the previous month, the think tank said in an April 17 statement.

The LEI offers an early indication of where the economy is headed in the near term. The March decline followed a 0.3 percent dip in February, indicating weakness in the European economy.

All five non-financial components of the index fell in March, suggesting heightened negative sentiment. This includes consumer expectations for the broader economy, new manufacturing orders, residential building permits, and services business expectations.

During the six-month period between September 2024 and March 2025, LEI fell by 2.8 percent, continuing the decline from the previous six-month period.

“The six-month and annual growth rates of the Index, although less negative than a year ago, still point to obstacles to growth ahead,” said Stephanie Guichard, senior economist at The Conference Board.

“Taking into account the impact of new U.S. tariffs as well as the high level of uncertainty, The Conference Board projects the Euro Area’s real GDP to slow to 0.8 percent in 2025.”

The latest LEI numbers were published as the European Central Bank (ECB) announced on April 17 that it was lowering three key interest rates by 25 basis points.

Even though the European economy has been building up some resilience to deal with global shocks, rising trade tensions have caused the growth outlook to deteriorate, the ECB said.

“Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area,” it said.

In early April, President Donald Trump announced a 10 percent baseline tariff on imports from all countries as well as reciprocal tariffs on several nations after taking into account their trade barriers on the United States.

The reciprocal tariffs for the European Union were set at 20 percent. The president later announced a 90-day pause on reciprocal tariffs.

During a press conference on April 17, Christine Lagarde, president of the ECB, said, “The major escalation in global trade tensions and associated uncertainties will likely lower euro area growth by dampening exports, and it may drag down investment and consumption.”

Tariffs and EU Impact

During a meeting with Italian Prime Minister Giorgia Meloni at the White House, also on April 17, Trump expressed confidence in an EU trade deal.

The president said he has “very little problem making a deal with Europe, or anybody else, because we have something that everybody wants.”

Trump also dismissed concerns about China attempting to win over the United States’ trade partners amid the ongoing tariff issue.

“Nobody can compete with us, nobody,” he said.

On April 7, Trump said the EU needed to buy $350 billion worth of energy products from the United States to avoid the tariffs.

“The European Union’s been really tough over the years. We have a [trade] deficit with the European Union of $350 billion, and it’s going to disappear fast,” Trump said in response to a reporter’s question.

“And one of the ways that that can disappear easily and quickly is they’re going to have to buy our energy from us. ... They can buy it, we can knock off $350 billion in one week.”

In a March 25 economic outlook for the eurozone, S&P Global said it was revising down the euro region’s GDP growth forecast for the year from 1.2 percent to 0.9 percent because of “uncertainty and U.S. tariffs.”

“In a severe tariff scenario, GDP growth in the eurozone could be limited to 0.5 percent in 2025 and 1.2 percent in 2026, with the ECB cutting interest rates more than once this year and raising them later than we currently expect,” the report reads.

“Trade uncertainty, potential failure to execute fiscal plans, and spillovers from the U.S. economy currently dominate the balance of risks. However, positive factors could tip the balance if the positive effects from fiscal stimulus programs exceed expectations or confidence improves rapidly.”