Growth in Emerging Markets Hits Seven-Month Low

Growth in the emerging markets slowed in February to its lowest level for seven months, according to the HSBC Emerging Markets Index (EMI). The headline figure fell to 52.3 in February, from 53.8 in January. HSBC's EMI is a monthly indicator that is derived from the HSBC Purchasing Managers' Indices that follow 16 key emerging economies.


Manufacturing rose at the slowest rate since November, while growth in the services sector dropped to a six-month low. Combined output slowed in China, India and Brazil, the largest of the emerging economies. However, in India there was accelerated growth in the manufacturing sector and purchasing activity grew at the fastest rate for 10 months.


All three countries reported weaker growth in the services sector. The rate of expansion in China's manufacturing sector eased in February. New orders rose for the fifth successive month, but at a modest pace. New export orders also increased fractionally.


In Brazil, manufacturers pointed to improved domestic conditions as the main spur to growth, although some companies benefited from a modest increase in new export orders.


Despite the slowdown, expectations for future output improved. The HSBC Emerging Markets Future Output Index, which tracks the expectations for business activity in 12 months, rose for the second consecutive month to its highest since May 2012. This was largely driven by improving sentiment in the manufacturing sector.


"Expectations of 'future output' by emerging market businesses, specifically by manufacturers, improved sharply in February as a sign of strong sentiment," says Murat Ulgen, HSBC Chief Economist, Central and Eastern Europe and Sub-Saharan Africa. "Our hopes are mainly pinned on China, Asia and commodity producers in the Middle East, as Latin America and Central and Eastern Europe, the Middle East and Africa are yet to show more convincing strength."

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