Private sector activity in emerging markets slows down in March, says HSBC

Written by PTI | New Delhi | Updated: Apr 4 2014, 21:18pm hrs
HSBCPolitical uncertainty locally may also be to blame," said Frederic Neumann, co-head of Asian economic research at HSBC. (Reuters)
Private sector activity in emerging market economies fell for the fourth consecutive month in March, notably because output contracted in three of the four largest economies, says an HSBC survey.

The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI surveys, fell to 50.3 in March, from 51.1 in February.

Private sector output contracted in three of the four largest emerging economies -- China, India and Russia -- since February.

China posted a marginal decline for the second month running, while India slipped back into contraction.

Meanwhile, Russian private sector output fell at the fastest rate since May 2009, HSBC said.

"Emerging markets are going through a rough patch. Lacklustre demand in advanced markets has so far restrained exports. Political uncertainty locally may also be to blame, with elections coming up in key economies, such as India and Indonesia, and geopolitical tensions casting a shadow in Eastern Europe," said HSBC Co-Head of Asian Economic Research, Frederic Neumann.

New business order flows eased in March, and backlogs of work continued to decline as well. Subsequently, employment growth remained weak during the month.

During March, the HSBC composite index for India, which maps both manufacturing and services, stood at 48.9, while for China it was 49.3, Brazil (51) and Russia (47.8).

An index measure of above 50 indicates expansion.

According to HSBC, hopes regarding production output look bullish as the Emerging Markets Future Output Index that tracks firms' expectations for activity in 12 months' time was still at the second highest level in the past seven months.

"Asia had a wobbly start to 2014, no doubt. But drop in PMIs seems to be stabilising amid tentative signs of export pick-up," Neumann added.

MH370

BSE Sensex and NSE Nifty throughout the day. In choppy trade, it declined to day's low of 22,369.28 before settling at 22,509.07, a loss of 42.42 points or 0.19 per cent from its previous close (PTI)

Emerging markets private sector output growth falls 4th straight month: HSBC survey

(Reuters) Business activity across emerging markets fell for the fourth straight month in March, with output contracting in three of the four biggest economies, a survey showed on Friday.

HSBC's composite emerging markets index of manufacturing and services purchasing managers' surveys slipped to 50.3 from 51.1 in February, teetering on the 50 threshold that marks the difference between expansion and contraction.

The index is under the 2013 average of 51.7 and the long-run level of 54.0, as output contracted in three of the four biggest emerging economies, China, India and Russia.

Based on data from purchasing managers at about 8,000 firms in 17 countries, the survey showed China posting a decline for the second month in a row, India slipping back into contraction and Russian output slumping at the sharpest rate since May 2009.

As a result, emerging markets output fell for the first time in eight months in March while service sector activity rose at the slowest pace since July.

"Emerging markets are going through a rough patch. Lacklustre demand in advanced markets has so far restrained exports. Political uncertainty locally may also be to blame," said Frederic Neumann, co-head of Asian economic research at HSBC.

Elections are due this month in countries including India, Hungary and Indonesia, while Turkey held closely watched municipal elections last weekend. Geo-political tensions around Russia and Ukraine have also cast a shadow over eastern Europe.

But Neumann said the slowdown was down to deeper, structural issues, such as reforms in China that were restraining growth and credit access in the short term.

"Slowing mainland growth is spilling over to other emerging markets as well, primarily to those reliant on commodity exports," he added.

The exception among the big economies was Brazil where manufacturing accelerated to the fastest level in three months.

But all four BRICs, Brazil, Russia, India and China, registered the lowest business expectations in manufacturing last month, with Russia showing the weakest overall outlook. The Czech Republic, Poland and Vietnam exhibited the strongest sentiment.

HSBC's future output index, which tracks firms' expectations for activity in 12 months' time, eased from February's 11-month high as manufacturing expectations weakened.

The HSBC index is calculated using data produced by Markit.