Key Takeaways
- Moody's has highlighted significant execution risks for the UK's budget, despite a stated commitment to fiscal consolidation, amid increased borrowing and structural challenges.
- Spain's current account balance experienced a notable decline in November, dropping to 1.873 billion EUR from 5.1 billion EUR in the previous period.
- German regional CPI data for November indicates a broad-based month-over-month contraction in consumer prices across several states, though year-over-year rates remain relatively stable.
- Italy's Q3 GDP saw an upward revision, with quarter-on-quarter growth at 0.1% and year-on-year growth at 0.6%, primarily driven by exports.
- The European Central Bank's 1-year CPI expectations for October rose to 2.8%, suggesting persistent near-term inflation concerns, while 3-year expectations held steady at 2.5%.
The European economic landscape presented a mixed bag of indicators on Thursday, November 28, 2025, with the UK facing fiscal scrutiny, Spain reporting a sharp drop in its current account, Germany showing cooling regional inflation, and Italy's GDP registering an upward revision. Meanwhile, the European Central Bank's (ECB) inflation expectations pointed to continued near-term price pressures.
Moody's, the credit rating agency, acknowledged the UK's commitment to fiscal consolidation in its latest budget but cautioned that execution risks remain high. The agency expressed skepticism regarding the budget's capacity to significantly boost growth potential, citing underlying structural issues within the UK economy. The budget's plans involve increased borrowing, estimated at around £32 billion annually, and changes to fiscal rules, which Moody's views as posing "an additional challenge" to public finances. This assessment follows a surge in UK gilt yields after the budget announcement, reflecting investor apprehension.
In Southern Europe, Spain's current account balance for November saw a substantial decrease, falling to 1.873 billion EUR from 5.1 billion EUR in the preceding month. While the current account surplus for the year up to August stood at 35.98 billion EUR, marking the second-best performance on record for that period, the November data indicates a significant monthly contraction. This sharp decline warrants close monitoring for its potential impact on Spain's external sector.
Across Germany, preliminary regional Consumer Price Index (CPI) data for November revealed a general trend of month-over-month deflation. States such as Hesse, Brandenburg, Baden Wuerttemberg, North Rhine Westphalia, and Saxony all reported negative monthly CPI figures, ranging from -0.2% to -0.3%, following positive growth in the prior month. Despite the monthly cooling, year-over-year inflation rates in these regions remained relatively stable, hovering between 2.2% and 2.6%. This regional data precedes the broader German HICP flash estimate for November, expected later today.
Italy delivered more positive news, with its final Q3 GDP figures showing an upward revision. Quarter-on-quarter GDP growth was adjusted to 0.1%, up from a preliminary estimate and previous reading of 0.0%. On a year-over-year basis, the economy expanded by 0.6%, also a revision from the earlier 0.4% estimate. This growth was primarily fueled by exports, offering a glimmer of resilience for the Eurozone's third-largest economy. The European Commission anticipates Italy's GDP to grow by 0.4% in 2025, supported by moderate private consumption and accelerating investment.
Finally, the European Central Bank's (ECB) Consumer Expectations Survey for October indicated a rise in near-term inflation expectations. The 1-year CPI expectation increased to 2.8%, surpassing both the estimated 2.6% and the previous month's 2.7%. However, the 3-year CPI expectation remained steady at 2.5%, aligning with estimates. This divergence suggests that while consumers anticipate persistent inflation in the short term, longer-term expectations remain anchored around the ECB's target, potentially reinforcing the central bank's stance that no further immediate rate cuts are necessary.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.