Productivity Measurement Analysis series – Euro Area, Q1 2025 by Klaas de Vries.
Labour productivity in the euro area began 2025 on a strong footing. Defined as real gross value added (GVA) per hour worked, productivity rose by 0.4% year-on-year in the first quarter.[1], [2] More notably, it increased by a striking 0.7% compared to the previous quarter – an unusually large jump following a 0.3% decline in Q4 of 2024.
| (1) | (2) | (3) | |
| Q1/2025 | Q1/2025 | vs Q4 of | |
| q/q | y/y | 2019 | |
| Real gross value added | 0,43 | 0,8 | 5,6 |
| Persons employed | 0,19 | 0,7 | 5,1 |
| Total hours worked | -0,25 | 0,4 | 3,8 |
| Labour productivity (per worker) | 0,24 | 0,1 | 0,4 |
| Labour productivity (per hour worked) | 0,69 | 0,4 | 1,7 |
Context and background
Real GVA rose by a robust 0.43% in Q1, boosted in part by export front-loading ahead of anticipated U.S. tariff increases – a dynamic particularly evident in Germany and Ireland. Spain also continued to post solid growth, contributing to the euro area’s overall expansion.
Employment grew by 300,000 (seasonally adjusted), with Italy and Spain accounting for most of the gains. Interestingly, average hours worked per employee declined, which lifted the per-hour productivity metric. This could reflect firms reducing hours instead of cutting headcount amid uncertainty. However, since GVA also rose solidly, the drop in hours likely reflects a combination of cyclical hesitation and a structural shift: average hours worked remain around 1.2% below pre-pandemic levels.
Variation across countries
Among the larger economies, productivity growth was strongest in Spain, France, and the Netherlands, though for different reasons. In Spain, the gain reflects a broad cyclical upswing driven by booming services exports and rising labour force participation. In France, productivity is rebounding after being suppressed by short-time work schemes during and after the pandemic. In the Netherlands, recent gains stem from structural improvements in efficiency across sectors like logistics and professional services, supported by digitalisation and better resource use.[3]
In contrast, Italy saw a decline in productivity, largely due to the winding down of the “superbonus” home renovation scheme, which had previously inflated construction output. With employment remaining high, the resulting drop in output pushed productivity lower. In Germany, productivity figures remain volatile, but the broader trend since 2021 shows stagnation, with recent gains driven mostly by temporary export surges rather than structural improvements.
Significance
This jump in euro area productivity is notable not only for its size, but also because it comes at a time when structural headwinds – such as aging demographics, shorter working hours, and high economic uncertainty – are still in play. While some of the boost appears temporary (e.g. pre-tariff export activity), the strength of underlying GVA and improving efficiency in countries like the Netherlands suggest there may be more resilience in the region’s productivity dynamics than previously assumed.
[1] The Euro Area aggregate is based on data for Ireland that excludes sectors that are dominated by foreign-owned multinational enterprises. These data are used as they represent a more realistic (and less volatile) picture of the Irish economy. The growth rate of Euro Area productivity growth including the total gross value added data for Ireland is 1,1 percent on a year over year basis and 1 percent on a quarter over quarter basis.
[2] The official press release can be found here: https://ec.europa.eu/eurostat/web/products-euro-indicators/w/2-06062025-ap
[3] https://www.ing.nl/zakelijk/economie/nederland/nederland-laat-eindelijk-weer-productiviteitsgroei-zien.