The economic growth in emerging markets slowed in the April-June quarter because of weakness in the manufacturing sector as well as below-trend expansion of the services sector, an HSBC survey said.
The HSBC Emerging Markets Index slipped to 53.0 in the second quarter of this calendar year, from 53.6 in the January-March period, as a relatively better performance from the services sector was offset by only modest growth in manufacturing in the emerging market economies.
Among the big-four emerging markets, expansion in Brazil and China was lower than India and Russia.
While Brazil and China saw new export orders decline, India and Russia witnessed a rise in export orders. The expansion was also seen in the Turkey and South Korea.
Euro Zone worries
Although the HSBC EMI, which is based on 21 PMI (Purchasing Managers’ Index) surveys conducted across 16 emerging markets, stayed above the 50-mark that differentiates growth from slowdown, HSBC noted that the global economic condition is posing strong headwinds for them.
“The protracted nature of the Euro Zone crisis will continue to pose strong headwinds for the emerging economies with financial deleveraging and export trade channels providing powerful undercurrents dragging down the economic performance of emerging markets,” the HSBC’s Chief Economist for Central and Eastern Europe and sub-Saharan Africa, Mr Murat Ulgen, said.
The manufacturing sector remained the greatest drag on activity, which still remains considerably below pre-crisis levels despite an improvement on the first quarter of 2012.
“This quarter there is a visible slowdown in the emerging giants comprising the majority of the BRICs, exacerbating a year-long pattern of below-trend growth rates for the emerging world,” Mr Ulgen said.
On the right track, still
Mr Ulgen further added that the 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.
Looking ahead, emerging market service providers remain confident about the one-year business outlook, with the degree of optimism the highest in two years.
However, the extent of positive sentiment remains lower than in any quarter prior to the onset of the financial crisis. Of the big-four emerging markets, the services sector optimism was strongest in Brazil and India, the HSBC report added.