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06 Mar 2014

EMI continues slowdown

EMI continues slowdown

Manufacturing output in emerging markets was weighed down by China, Russia and South Korea

The HSBC Emerging Markets Index fell for the third month in a row as manufacturing activity slowed. The index dropped to 51.1 in February, from 51.4 in January, the lowest reading since September 2013.

Manufacturing output in emerging markets was weighed down by a weakening of conditions in China, Russia and South Korea. Growth slowed in Mexico and remained low in Brazil. In contrast, Poland and the Czech Republic posted sharp increases, as did Taiwan. Services activity increased, albeit at a weak rate.

Emerging economies are struggling to gain traction. The HSBC Emerging Markets Index lost ground for the third straight month, slipping to 51.1 in February

Murat Ulgen,
Chief Economist for Central and Eastern Europe and sub-Saharan Africa, HSBC

Murat Ulgen, Chief Economist for Central and Eastern Europe and sub-Saharan Africa, HSBC, said: “Emerging economies are struggling to gain traction. The HSBC Emerging Markets Index lost ground for the third straight month, slipping to 51.1 in February. This time the weakness came from manufacturing, while services recorded a slight improvement. Details suggest manufacturing weakness in China and Russia continued to weigh on overall business conditions. Central and Eastern Europe remained strong.”

New business rose at the slowest rate in five months. Employment was broadly unchanged over the month and backlogs of work declined further. Inflationary pressures remained weak overall, despite evidence of cost pressures in Brazil, Russia, Turkey and the Czech Republic linked to exchange rates.

Regional view

  • “EM data disappoints again, led by China. The silver lining is stocks have fallen compared to new orders, so a pickup is possible.”
    Pablo Goldberg
    Global Head of Emerging Markets Research, HSBC
  • “Export orders still weak, hinting at Asia’s loss of competitiveness. The good news: firms are more optimistic about growth ahead.”
    Frederic Neumann
    Co-Head of Asian Economic Research, HSBC
  • “Weak expansion persists. Modest Brazil improvement tempered by deceleration in Mexico manufacturing, reflecting slow US start.”
    Andre Loes
    HSBC Chief Economist, Latin America
  • “Recent geopolitical tension surrounding Ukraine and Russia may disrupt what has been a bright outlook in CEE since mid-2013."
    Murat Ulgen
    HSBC Chief Economist, Central and Eastern Europe and sub-Saharan Africa
  • “Gulf oil producers still outpacing the rest of EM; recovery for troubled N Africa remains elusive.”
    Simon Williams
    HSBC Chief Economist, MENA

The HSBC Emerging Markets Future Output Index, which tracks firms’ expectations of activity in 12 months, rose to its highest level in 11 months, reflecting improved sentiment.

Mr Ulgen said: “Looking ahead, there is little hope for a quick turnaround as new order growth lost further momentum. That said, expectations for future activity in 12 months' time are improving which is evident in healthy gains in the Future Output Index, for both manufacturing and services.”

The EMI is derived from HSBC Purchasing Managers’ Index™ reports in 17 emerging economies. A reading above 50 signals growth, while below 50 signals contraction.

The intellectual property rights to the HSBC Emerging Markets Index provided herein is owned by Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit's prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information ("data") contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index™ and PMI™ are trade marks of Markit Economics Limited, HSBC use the above marks under licence. Markit and the Markit logo are registered trade marks of Markit Group Limited.

Read the March 2014 HSBC EMI press release

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