Macmillan Jones Says Trade War Could Hurt EU Economy

Economists at Macmillan Jones say economic growth in the euro zone, which is already being affected by a stronger currency, will be negatively affected by growing trade tensions between China and the United States.

However, Macmillan Jones economists say that this and the likelihood that inflation will remain below the European Central Bank’s target for the next three years will not prevent the central bank from concluding its asset purchasing program in 2018 and lifting interest rates next year.

While most economists polled left their growth forecasts unchanged from last month, Macmillan Jones analysts say private corporate surveys indicate that growth momentum in the euro zone may have reached its peak.

Macmillan Jones economists say the first quarter of this year has been disappointing for the euro zone economy after a particularly strong 2017. While the outlook is still positive, Macmillan Jones economists say there is some indication that 2018 growth will show some moderation.

Euro zone companies have been badly affected by a stronger euro, causing them to conclude the first quarter with their most modest growth since the beginning of last year. Macmillan Jones analysts say the euro, which is already up against the U.S. dollar by three percent so far this year, is expected to gain an additional four percent within the next 12 months.

According to a recent survey by Macmillan Jones, economists predict that rising trade tensions between the U.S. and China will hurt the euro zone economy.

Macmillan Jones analysts say trade in goods declined last month even before fears of a global trade war came under the spotlight and that whether threatened by a stronger currency or the specter of a trade war, euro zone exports are in for a tougher time this year.