Market News
Euro zone companies warn of slowing economy, China competition, ECB poll shows - REUTERS
FRANKFURT, July 25 (Reuters) - Euro zone companies are facing a slowing economy and increased competition from China as U.S. tariffs dent confidence and force rivals to seek new markets, a European Central Bank poll showed on Friday.
The ECB left interest rates unchanged on Thursday and offered a modestly upbeat assessment of the euro zone economy, raising doubts among investors about further policy easing even as U.S. tariff threats cloud the outlook.
But an ECB survey of 72 large companies operating in the euro area pointed to a slowdown in the manufacturing and services sectors, resulting in a more subdued outlook for employment and prices.
The ECB contacted the companies between June 23 and July 2.
"Contacts reported a slowdown in activity in recent months as tariffs, geopolitical tensions and the resulting uncertainty dented business and consumer confidence," the ECB said. "The feedback from contacts was consistent with very modest growth in both the second and third quarters."
The companies contacted by the ECB viewed U.S. tariffs - the extent of which is currently being negotiated - as a negative for growth and said competition from Chinese goods was playing an "increasing role".
"The downward pressure on both activity and prices reflected reduced demand, in part caused by trade diversion from Asia (and China in particular) as exporters from the region sought alternatives to the U.S. market," the ECB said.
This had mostly affected intermediate goods so far and had "little to no impact on final consumer prices," but it was expected to broaden in the coming months and quarters.
"By contrast, contacts in the retail and consumer services sectors reported minimal, if any, impact on their activity or prices to date, and did not anticipate much impact in the near future," the ECB added.
Wage growth was expected to slow from the 4.5% pace recorded last year, but by less than in the previous survey. Companies now forecast pay rising by 3.3% this year and by 2.8% in 2026.
Reporting by Francesco Canepa; Editing by Jamie Freed
