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HSBC Emerging Markets Index (February 2013)

Broad-based slowdown in emerging markets growth in February.

HSBC Emerging Markets Index (February 2013)
Note: The HSBC Emerging Markets Index, a weighted composite indicator derived from national HSBC Purchasing Managers’ Index™ (PMI™) reports in 16 emerging economies, is now being published on a monthly basis rather than quarterly.

Key points
- HSBC Emerging Markets Index: 52.3 (prior 53.8)
- Weaker increases in output across China, India and Brazil
- Future output expectations improve

The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI™ surveys, fell from 53.8 in January to 52.3 in February. That was the lowest figure since August 2012 and indicated a moderation in economic growth in global emerging markets.
Data broken down by broad sector showed that the slowdown in the pace of expansion was broad-based across service providers and manufacturers. Goods production rose at the slowest rate since November, while services activity growth eased to a six-month low.
Among the largest economies covered, growth rates slowed in China, India and Brazil in February. Moreover, softer increases in output were evident in both the manufacturing and services sectors of these countries (except for India, were goods production growth accelerated).
New business growth in emerging markets slowed to a six-month low in February, and was also weaker than the trend shown over the course of 2012. All four BRIC economies registered slower increases in new business since January. Meanwhile, employment rose at the weakest rate in three months.
The rate of input price inflation in emerging markets accelerated to a ten-month high in February, with broadly similar increases seen in manufacturing and services. Meanwhile, prices charged for goods and services rose for the sixth successive month, albeit at a modest rate.

HSBC Emerging Markets Index (February 2013)

Business expectations
The HSBC Emerging Markets Future Output Index is a new series tracking firms’ expectations for activity in 12 months’ time. The Index rose for the second month running in February, to its highest since May 2012. This was largely driven by improving sentiment in the manufacturing sector, where the Future Output Index was the highest in 11 months of data collection to date. Business expectations at service providers were the strongest in three months.

HSBC Emerging Markets Index (February 2013)

Murat Ulgen HSBC Chief Economist, Central and Eastern Europe and Sub-Saharan Africa:
“Emerging Market economies continued to expand in February but the pace of growth lost steam. The slowdown appears to be broad-based across manufacturing and services, with BRIC activity moderating after a promising start to the new year. The February EMI report suggests the softening in new orders was felt across the BRIC economies, particularly for new export orders in the manufacturing industry. The improvement in employment conditions was weak and marginally slower than the previous two months. The fall in the index shows that for now growth is still the big issue for emerging markets and that for many economies, inflation is set to remain a secondary issue.

“We see two scenarios here. Either the emerging markets will wobble along, buffeted by worries in the developed world, be it US fiscal issues, lingering structural and political challenges in the Eurozone, or the continued deluge of capital inflows, set to be boosted further thanks to Japanese monetary stimulus. In that scenario, external headwinds may restrain the mighty EM growth engine. Alternatively, the current slowdown will prove temporary as the inventory cycle works its way through and improved underlying fundamentals bring back the days of strong growth.
“For now, we lean towards the second scenario. In fact, expectations of ‘future output’ by EM businesses, specifically by manufacturers, improved sharply in February as a sign of strong sentiment. Our hopes are mainly pinned on China, Asia and commodity producers in the Middle East, as LatAm and CEEMEA are yet to show more convincing strength.”
Pablo Goldberg - Global Head of Emerging Markets Research
“A pickup in external headwinds suggests concerns might move from inflation to growth. The emerging world needs China to keep a strong pace of expansion.”

Regional tweets
Murat Ulgen - HSBC Chief Economist, CEE & Sub-Saharan Africa
“Benign inflation offers room for stimulus in CEE and Germany’s resilience could help though only Russia and Turkey are doing well.”
Simon Williams - HSBC Chief Economist, MENA
“Middle East oil producers are powering on, but Egypt's pain continues with high inflation now compounding the problem of weak growth.”
Frederic Neumann - Co-Head of Asian Economic Research
“Softer Asian growth likely temporary. China's New Year weighed on activity, but new order to inventory ratio suggests output to hold up in coming months.”
Andre Loes - HSBC Chief Economist, LATAM
“Expanding, but weaker than previous month. Mexico feeling the US moderation, while Brazil converges to a mild growth speed.”

HSBC Emerging Markets Index (February 2013)

The rate of expansion in China’s manufacturing sector eased in February. New orders rose for the fifth successive month, but at a modest pace. New export orders also increased at a fractional rate.
Brazilian manufacturing output increased for the sixth successive month, as companies stepped up production in response to rising levels of new work. Manufacturers generally cited improved domestic conditions as the main spur to growth, although some firms also benefited from a modest increase in new export orders.
The expansion of Mexico’s manufacturing sector continued in February. However, the rate of growth was the slowest for over a year as both output and new orders increased at weaker rates. Manufacturers meanwhile took a cautious approach to hiring. The rate of input cost inflation was the fastest since last June.
Reflective of higher levels of total new business, production in the Indian manufacturing sector rose during February. The pace of growth was solid, and faster than that seen in January. Purchasing activity expanded at the quickest rate in nine months.
Output in the South Korean manufacturing sector fell slightly during February. Companies continued to report challenging economic conditions, although new orders increased and firms raised purchasing at the fastest rate in ten months, suggesting higher output in the coming months. Meanwhile in Taiwan, output growth nearly stagnated as new orders rose only slightly.
In South East Asia, goods production in Vietnam fell for the first time in four months, while a flat trend was registered in Indonesia. Moreover, new export orders declined in both countries.
Growth momentum in the Russian manufacturing sector was broadly maintained in February. Domestic markets drove new business growth as new export orders stagnated, continuing the flat underlying trend shown since the second half of 2012.
Poland’s manufacturing economy remained in contraction in February as both output and new business continued to fall. Factory gate prices declined at the fastest rate since July 2009 as companies attempted to stimulate demand. Meanwhile in the Czech Republic, business conditions showed signs of recovery as new orders increased for the first time since March 2012.
February data signalled a further rise in output and new orders at Turkish manufacturing companies, while payroll numbers increased further. Moreover, firms raised their prices at the fastest rate since October 2011.
In the Middle East, manufacturing data derived from PMI non-oil economy surveys in Saudi Arabia and the United Arab Emirates indicated sustained output growth in both countries in February. That said, new business expansion weakened to the slowest in seven and 14 months respectively. Meanwhile in Egypt production fell for the fourth month running, albeit at the slowest rate since November.

Business expectations

HSBC Emerging Markets Index (February 2013)

Brazil’s combined manufacturing and services economy registered the strongest degree of positive sentiment in four months in February and the highest among the BRICs, in contrast to January when sentiment had weakened.
Chinese business expectations brightened again in February, with the strongest degree of positive sentiment since April 2012, the first month of data collection for the combined manufacturing and services future output series.
In contrast, the 12-month output outlook moderated in Russia to the weakest in six months, while the strength of business expectations was unchanged since January in India.
In the Middle East, non-oil private sector business expectations were strongly positive in Saudi Arabia and the United Arab Emirates. Private sector companies in Egypt also forecast output growth over the next 12 months.
Manufacturing output expectations for the next 12 months improved in January in the majority of economies surveyed. Mexico, Indonesia and Vietnam held the strongest overall expectations among the economies covered by manufacturing PMI surveys. The weakest outlooks were registered in Poland and the Czech Republic.

HSBC Emerging Markets Index (February 2013)

Jeudi 11 Avril 2013