Emerging markets remain stuck in low gear in May: HSBC PMI

Overall business activity across the Chinese manufacturing and services sectors declined slightly for the third month running

June 06, 2014 10:35 IST | India Infoline News Service
The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI surveys, continued to indicate only a marginal increase in output across global emerging markets in April. The EMI posted 50.4 from 50.3 in March, well below its eight and a half year long-run trend level of 53.9.

April data indicated falling output in the four largest emerging economies. Overall business activity across the Chinese manufacturing and services sectors declined slightly for the third month running, the longest sequence of contraction in over five years.
Meanwhile, private sector output in Russia fell at the fastest rate since May 2009. Indian business activity fell for the ninth time in ten months, albeit marginally, while Brazil posted a fractional decline for the second time in four months.

Cost pressures remained subdued in April, as average input prices increased at the slowest rate since June 2013. Manufacturing input prices continued to fall in China, South Korea and Poland, while Russia and Turkey continued to post the sharpest rates of inflation.

Chris Williamson, Chief Economist, Markit, said, “The EMI data show a near-stagnation of business activity in the emerging markets for a second successive month in April. The malaise looks to be set in: companies are certainly not expecting any imminent upturn, with expectations about the year ahead in
fact deteriorating further.

“The weakness of the survey data add to fears that emerging market languidity will continue to act as a dampener on global economic growth in coming months. The concern is that the moribund economic picture is also broad-based, encompassing Asia, South America and Africa.

“Russia is seeing its steepest downturn since the height of the global financial crisis; China’s PMI is signalling contraction for a third month running, suggesting GDP growth will weaken further in the second quarter, while Hong Kong, India and Brazil are also contracting, albeit at only marginal rates. Falling output in South Africa and Egypt meanwhile points to renewed economic weakness on the African continent.

“There are some bright spots, however, with strong growth continuing to be recorded in the Middle East and robust rates of expansion seen in Eastern Europe, the latter benefitting from the eurozone’s gathering recovery.”

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