Bloomberg News

Emerging-Market Growth Slows on Services and Industry, HSBC Says

March 06, 2013

Emerging-market economic growth was probably the weakest in seven months in February as global demand declined for manufacturing and services, HSBC Plc said, citing a survey of purchasing managers.

The HSBC Emerging Markets Index, which is compiled by London-based Markit Economics and tracks conditions at more than 5,000 companies, fell to 52.3 in February from 53.9 in January, HSBC said in a report today. Industrial production rose at the slowest rate since November, while services growth was the weakest in six months. A value above 50 indicates expansion and below 50 signals contraction.

New business expansion slowed in all four of the so-called BRIC economies -- China, India, Brazil and Russia -- while employment expanded at the slowest pace in three months, HSBC said in the report. Growth remains a bigger concern than inflation, according to the report. India, Columbia, Hungary and Poland were developing-nation central banks to have cut rates this year.

“The slowdown was felt pretty much across the board in many economies in manufacturing and services,” Murat Ulgen, HSBC’s London-based chief economist for central and eastern Europe and sub-Saharan Africa, said yesterday in a phone interview. “One of the main reasons is a slowdown in new orders, in particular new export orders in the manufacturing industry.”

The MSCI Emerging Markets Index (MXEF) has fallen 0.3 percent this year, compared with a 8.1 percent gain for the S&P 500.

Improving Sentiment

The HSBC Emerging Markets Future Output Index, which gauges company executives’ expectations for output in 12 months, rose for a second month, to its highest since May 2012, driven by improving sentiment in the manufacturing industry, HSBC said.

“One scenario is that emerging markets will wobble along with developed markets because there are so many headwinds and challenges,” Ulgen said. “The alternative scenario is that this slowdown is a soft patch -- it’s temporary. Once this inventory adjustment works itself through, we’ll return to fairly robust growth rates. We believe it’s a soft patch, mid- cycle and the momentum will be regained.”

The rebound will be led by China, where the slowdown can be attributed to the effects of the Chinese New year, Ulgen said. Central and eastern Europe and Latin America are lagging emerging Asia, he said.

Chinese business expectations for combined manufacturing and services output rose to the strongest since April 2012. Manufacturing expectations for the next 12 months were the weakest in Poland and the Czech Republic, HSBC said in the report.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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