EURO ZONE

摘要

The Euro zone outlook has worsened this month amid the US-China trade war which has triggered a renewed 'race to the bottom' for major currencies. This has caused alarm in export-oriented Germany where the car industry relies on global supply chains vulnerable to tariffs. German industrial production dropped by -1.5% (m-o-m) in June, while the Euro zone saw a similar -1.6% fall. In addition, PMIs for manufacturing in Germany, Italy and France all burrowed deeper into negative territory in July. The services sector tends to be more sizeable than manufacturing and, indeed, services in all three countries appear to be holding up somewhat, but this has not stopped observers warning of a possible recession. Fears of a no-deal Brexit and Italy's governing crisis also remain risk factors. Italian GDP growth was flat in both q-o-q and y-o-y terms in Q2, while Germany contracted by -0.1 % (q-o-q). Euro zone GDP halved from 0.4% (q-o-q) in Q1 to 0.2%. The onus is on the ECB to ease monetary policy. Inflation, meanwhile, hovered around 1.3% (y-o-y) in June.