Weakest emerging market growth in two years
Index eases to 54.2 in Q2 in fragile global economy
SABB HSBC Emerging Markets Index (EMI), a quarterly economic index developed and published in Saudi Arabia by HSBC Group and The Saudi British Bank-SABB, shows emerging market growth slowed to its weakest level in two years in the second quarter of 2011, reflecting global economic fragility, the exceptional consequences of the Japanese tsunami and amid the lingering impact of recent inflation. The SABB HSBC EMI dipped to 54.2, down from 55.0 in the first quarter and edging below the long-run series average of 54.8.
Price pressures eased sharply against a backdrop of continued monetary tightening by central banks across the emerging world in response to menacing inflationary pressures identified by previous EMI reading. The Q2 signalled the most acute easing of input cost inflation for two-and-a-half years.
The moderation in overall activity growth reflected a weaker increase in manufacturing production, with the pace of expansion easing to the slowest in three quarters. Meanwhile, service providers recorded a slightly faster rise in business activity, albeit one that was the second-slowest since Q2 2009.
Rates of production growth eased across the majority of manufacturing sectors monitored by the survey, with South Africa and Singapore the two exceptions. In emerging Asia, China saw growth slow to the least marked in nine quarters while output rose at the weakest rates for two quarters in Taiwan and South Korea. Even India recorded a slower rise in manufacturing output, although the rate of growth remained substantial, and by far the healthiest of all emerging markets monitored by the survey. In Europe, particularly marked slowdowns were registered in Turkey and the Czech Republic while Russia saw activity growth moderate to a five-quarter low.
The weaker increase in manufacturing output in part reflected a lessening in new order growth, which in turn was linked to a slowdown in the rate of expansion in new export orders. Of the largest emerging markets, Brazil, China and Russia all recorded reductions in new export orders. Meanwhile, India reported the slowest pace of growth for one and-a-half years, and rates of expansion eased noticeably in Taiwan and South Korea. Only marginal increases in exports were seen in Turkey and Poland.
Despite easing to a six-quarter low, India again recorded the fastest rate of growth of all emerging market service sectors monitored by the EMI, followed closely by Russia. Rates of expansion held broadly steady in Brazil and Mexico, while output growth accelerated from Q1's record low in China. Business optimism among emerging market service providers dipped to the fourth-lowest in the series history, with confidence in China sliding to a record low and India dipping below Q1 levels. Conversely, optimism in the one-year business outlook reached a six-quarter peak in Brazil, and hit a six-and-a-half year high among Russian service sector firms.
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© Press Release 2011
