(Bloomberg) --
The weakness in euro-area manufacturing has so far failed to infect the services sector, but the situation needs to be monitored closely, the European Central Bank said.
Global trade tensions and developments in China, the U.K. and the U.S. accounted for 37% of the fall in euro-area industrial production in the year to June 2019, the ECB said in its bulletin article on Monday. The remaining 63% of the impact came from domestic factors, although some of them may be temporary and related to the situation in German car industry, according to the analysis.
“Whereas weakness in international trade was the main contributor to the fall in euro-area industrial production growth in the first half of 2018, from July 2018 onwards euro area-specific developments also played a major role,” Roberto De Santis and Srecko Zimic wrote in the report. “The marked weakness in manufacturing activity may be feeding into some sub-components of services, but overall the services sector is currently withstanding the negative shock.”
The ECB is watching closely for any sings of trade tensions feeding into domestic economy, but so far consumer demand has remained buoyant and unemployment low. Earlier this month, policy makers decided to roll out fresh stimulus to support growth in the 19-nation region. Some officials resisted the move to restart quantitative easing, arguing it was more than the economy needed at this point.
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