Emerging market output growth remains weak

August 2014

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.

Manufacturing output across emerging markets was broadly stagnant in April, while services activity growth was unchanged from March’s weak rate. The volume of new business across both sectors rose at a rate little-changed from March’s eight-month low. Backlogs of work fell for the fourth month running while a marginal cut in employment was signalled.

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.

Middle East & Africa

April data signalled a second consecutive record rise in activity in the UAE’s non-oil producing private sector, while both total new order orders and new export orders increased at sharp rates. Meanwhile, companies were encouraged to take on additional workers, with the rate of job creation the highest in over four years.

Non-oil activity in Saudi Arabia meanwhile rose at a slightly sharper rate than in March, while the increase in new orders was the quickest since the beginning of the year. New export business also rose in April, but the rate of growth was down from March’s joint-series high.

Egyptian non-oil private sector companies reported a renewed drop in output in April, ending a two-month sequence of growth. However, the pace of contraction was only marginal overall. New order intakes declined amid reports of ongoing fragile political conditions.

South African private sector companies reported a sharper fall in activity during April. Survey participants largely attributed the decline to lower new business and disruptions caused by ongoing mining strikes. New order intakes decreased at the fastest rate in the 34-month series history. In addition to the mining strikes, the upcoming elections were mentioned by panellists to have weighed on demand.