Weakness from China’s economy depressing European exports has been one factor triggering concern about Eurozone manufacturing growth among both markets and the European Central Bank, contributing to the bank’s recent dovish tilt. Improving momentum within China’s industrial sectors in early 2019—already apparent in our proprietary measures—may provide more support to European exports later this year relative to 2018, while US-China tariff actions also support stronger-than-projected European exports. However, expectations that policy support in China will generate the same level of activity demand and corresponding import growth as in previous economic cycles will likely be disappointed.
