Economic growth softened across emerging markets in the second quarter of 2012, with Brazil and China leading the downturn due to weakness in the manufacturing sector, shows a survey by HSBC.
HSBC's emerging markets index (EMI), based on 21 service and manufacturing sector surveys in 16 emerging economies, slipped to 53.0 in the second quarter of the year. It stood at 53.6 in the first three months of 2012.
While the indicator remains in the expansion territory, growth is well below pre-crisis level, HSBC says in its report.
An uneven growth picture has emerged in the so-called BRICs bloc, with Brazil and China lagging India and Russia in terms of expansion rate, says Murat Ulgen, HSBC chief economist for Central and Eastern Europe and sub-Saharan Africa.
“Brazilian activity growth weakened again, having looked more promising earlier in the year, and China recorded only modest growth. In both cases, manufacturing under-performance was the principal drag on activity,” says Ulgen.
Global demand for goods produced in Brazil and China declined in the April to June quarter, while India, Russia, Turkey and South Korea recorded growth in new export orders. India posted the largest gain on new orders, albeit less than the previous quarter.
Meanwhile, the HSBC report notes that the service sector in emerging markets continued to outpace manufacturing sector, but overall expansion was among the weakest in the past three years. However, Russia, India and Brazil posted the weakest service sector growth in three quarters.
China was the only BRIC member to record a decline in employment in the second quarter, the first fall in 13 quarters. The decline raises concerns about job creation in China's dominant manufacturing sector, but further stimulus from policymakers should ease some of the worries, according to the HSBC report.
“Emerging market growth remains resilient in the face of excessive external uncertainties and with plenty of ammunition at their disposal to deploy, they are set to stay on the right track,” says Ulgen.
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