Trade-war fears hit euro factories

Bloomberg

Euro-area manufacturers saw order growth slow to the weakest pace in two years after renewed concerns over trade prospects hit confidence.
Purchasing Managers’ Indexes (PMI) from across Europe signal business sentiment is waning, threatening to harm the economy at a time when price pressures are building after years of subdued growth. Momentum is also weakening in China, while output continued to contract in South Korea.
The reports come amid threats by Donald Trump to slap new tariffs on Chinese exports and tear up an agreement with the European Union to work toward a new trade order without escalating protectionism. European Central Bank official Olli Rehn labeled the US president’s latest push “regrettable” and urged him to stop “unnecessary rhetoric” that accuses policy makers in both regions of manipulating their exchange rates.
What Our Economists Say… “Growth in export-oriented sectors of China’s economy continued to lose momentum. The weaker reading in the survey suggests the escalating trade war with the US is starting bite.”
A Purchasing Managers’ Index for manufacturing in the euro area dropped to 54.6 in August from 55.1 in July, IHS Markit said on Monday. The reading matches a previous flash estimate.
“The business mood has become more unsettled during the summer,” said Chris Williamson, chief business economist at IHS Markit. Risks of new tariffs are hurting sentiment, and “the expansion is looking increasingly uneven.”
Williamson is particularly worried about Italy, where uncertainty about the populist government’s fiscal plans has roiled financial markets. The third-largest euro-area economy saw growth slow sharply in August, putting it on course for the weakest quarterly performance in almost two years. Momentum in Spain may be the worst in almost five years.