Growth of Emerging Markets Slows Down

Emerging markets continued to grow in December, though the rate of expansion was slower than the previous month, according to the HSBC Emerging Markets Index (EMI). The index fell to 51.6, from 52.1 in November.

 

Manufacturing output continued to rise at a faster rate than services activity, and the rate of growth was only fractionally weaker than November’s eight-month high. Service sector output rose at the slowest rate in three months.

 

Goods output growth was broad-based across the economies covered at the end of 2013, with the strongest expansions indicated in Taiwan, the Czech Republic and Turkey. Chinese manufacturing output growth eased from November‟s eight-month high.

 

New business inflows in global emerging markets rose for the fifth month running, albeit at the weakest rate since September. Backlogs continued to expand marginally, in line with the broad trend shown throughout the fourth quarter.

 

Inflationary pressures in emerging markets remained muted in the final month of 2013, with average input prices rising at the slowest pace since July. This led to the weakest increase in output prices in the current five-month sequence of inflation.

 

“Emerging economies are no longer expanding at the rapid rates recorded before the onset of the global financial crisis," says Stephen King, HSBC’s Group Chief Economist. "Nor have they been able to replicate the pace seen in late 2009 and early 2010 during the early post-crisis bounce.  Still, despite the relative weakness, there is no indication of any imminent descent into recession: consistently over 50, the index remains well above the traumatic levels recorded in 2008 and the first half of 2009.”

 

The HSBC Emerging Markets Future Output Index, which measures firms’ expectations of activity in 12 months, showed that Brazilian firms expressed more optimism than their Chinese and Indian counterparts. Russian firms were the least optimistic among the four largest emerging economies.

 

King said that the longer-term prospects for the emerging world remained encouraging. “China is still engaged in an economic transition of epic proportions, catching up for hundreds of years of earlier disengagement with the rest of the world.  As new economic synapses are created – through both trade and capital flows – China will carry on expanding at a rapid pace, even if its ageing population imposes a demographic constraint in coming years.

 

“China’s new-found wealth will, in turn, be invested in other parts of the emerging world currently lacking in 21st-century infrastructure.  Those investments will allow China easier access to the resources it craves but will also allow many emerging nations to trade more heavily with each other.  That, in turn, should be the catalyst for further economic expansion, creating a new Southern Silk Road for the emerging world.”

 

The EMI is derived from HSBC Purchasing Managers’ Index™ reports in 17 emerging economies. A reading above 50 signals growth; below 50 signals contraction.

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