New orders fell for a second month in the euro area as manufacturing activity in the currency bloc expanded at its weakest rate in more than two years in November with orders contracting for a second month. The biggest influencer on the eurozone data is thought to be the trade war between the US and China, according to IHS Markit Purchasing Managers’ Indexes, which has put pressure on global trade and sparked concerns of an economic slowdown in recent months. James Smith at ING said: ”We expect economic momentum to cool over the winter as wider investment stalls, and consumers become even more cautious. “For manufacturing specifically, the external environment poses further challenges as euro zone momentum slows and trade tensions remain elevated.”
The data from IHS came just after China and the US revealed the two economic powerhouses have initiated a 90-day trade war ceasefire.
The US and China have pledged not to unleash any more trade tariffs for at least 90 days while they hold discussions to resolve existing disputes.
Today the IHS data showed although factory activity rose slightly in China, new export orders extended their decline in a further blow to the sector.
However, global shares picked up after the US and China announced their truce, offering some reassurance on the economic outlook.
US data due out later on Monday are expected to show that factory growth in the world’s largest economy remained robust last month but eased slightly from October.
RBC economists told clients: “Other than the tariff deferral… little else of substance was agreed.
“Tellingly, no joint statement was released, with both sides instead releasing their own statements on the outcome which illustrate the gap that still exists between them.”
Manufacturing activity also slipped in November in countries as varied as France, Germany, Indonesia and South Korea.
British factories bucked the trend but the approach of Brexit was felt as companies stocked up on parts to counter any border delays, while exports suffered a rare back-to-back fall.
Britain’s PMI proved stronger than all forecasts in a Reuters poll of economists but was still one of the lowest since voters decided in a referendum in June 2016 to leave the European Union.
Deep uncertainty over the future pushed many British manufacturers to build up inventories of parts to protect themselves against the risk of customs delays at the border when Britain leaves the EU on March 29.
Yet China’s manufacturing sector activity grew slightly in November as export orders shrank, reflecting weakening global demand, its PMI showed.
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