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Emerging markets economic growth softens says HSBC index; Fragile developed markets hit emerging markets exports
By Finfacts Team
Jul 8, 2010 - 2:00:58 AM
Shanghai's World Financial Center - - China's tallest building.
Emerging markets economic growth softened in
the second quarter according to a HSBC economic index as fragile developed markets hit emerging markets exports.
Manufacturing growth in the emerging markets
slowed sharply from a record pace set in Q1 of this year, the latest HSBC
Emerging Markets Index (EMI) shows.
Although output remains above the long-term
average, it is below the average seen before the financial crisis. This easing
reflects a moderation in the rate of growth of new orders, especially for
manufacturing exports. And with developed nations showing few signs of domestic
demand and about to enter a period of fiscal retrenchment, world trade is likely
to soften further. In the second quarter of 2010, the HSBC EMI dropped to 55.8,
down from 57.4 in the first quarter of the year. However, it remains
significantly higher than in Q4 2008 when the index hit a trough of 43.4.
Stephen King, HSBC’s Chief Economist, said:
"We are in a new phase of global
economic development. Export gains for companies in the emerging world have
failed to sustain the momentum seen in earlier quarters. The stellar recovery in
economic activity across most of the emerging markets seen since the first half
of 2009 finally hit a bump in the road. The good news is that emerging markets,
having escaped the legacy of excessive debts, should not face the same kinds of
financial constraints which will keep the lid on economic activity in the
developed world in the years ahead."
Services expanded at a faster rate than
manufacturing for the first time since the onset of the financial crisis,
suggesting that growth has become better balanced and indicating that domestic
demand in the emerging world is holding up well even in the light of a faltering
manufacturing performance.
A slowdown in demand from the
developed world has hit emerging markets in the second quarter, according to a
report from HSBC Bank. Stephen King from HSBC and Robert Sloan from S3 Partners
discuss the outlook:
Overall growth in both output and new orders
weakened in China and Brazil but gathered pace in India and Russia. Indeed,
China, for several quarters the main driver of emerging markets growth, has lost
some of its shine. Exports across emerging markets grew at the slowest pace
since Q3 last year, with China recording an especially steep downturn. Russia
and Eastern Europe were the exceptions to the rule.
Companies in emerging markets took on
additional staff in Q2 at the fastest rate since the end of 2007, in order to
boost capacity and meet growing demand for goods and services. And in a further
sign of the balancing of economic growth, headcounts rose at a faster rate in
services than manufacturing, the former seeing the sharpest rise in payrolls for
two-and-a-half years. Regionally, employment increased at slower rates in China
and Brazil but improved in India and, particularly, in Russia.
The headline inflation numbers suggest fears
of a substantial pick-up within the emerging world may now begin to fade.
However, rates of inflation for both input and output prices were still faster
than those seen in H2 2009 as a whole. Input price inflation remained
considerable in manufacturing, reflecting both supply shortages and higher
global commodity prices. Input costs increased the most in Russia, followed by
India.
The HSBC EMI is calculated using the
long-established PMI (Purchasing Managers' Index ) data produced by global
financial information services company Markit. HSBC announced last year a
partnership with Markit to sponsor and produce a number of emerging market PMIs.
The index is a weighted composite indicator derived
from national Purchasing Managers’ Index (PMI) surveys in the emerging markets
of Czech Republic, Hong Kong, Israel, Mexico, Poland, Singapore, South Africa,
South Korea, Taiwan, Turkey and the increasingly important BRIC economies of
Brazil, Russia, India and China. These surveys collectively track business
conditions in over 5,000 reporting companies.
