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HSBC Emerging Markets Index: India posts sharp fall

Sep 05 2013, 15:09 IST
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Emerging market activity turned positive in August but India posts steepest rate of decline since 2009. Emerging market activity turned positive in August but India posts steepest rate of decline since 2009.
SummaryEmerging market activity turned positive in August but India posts steepest rate of decline since 2009.

Private sector activity across the emerging market economies edged higher in August, but India posted the steepest rate of decline since March 2009, an HSBC survey said today.

According to HSBC, emerging market activity turned positive again in August, after losing traction in every month since April, and experiencing outright contraction in July.

The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI surveys, recovered from July's post-crisis low in August, but signalled only a marginal rise in output across global emerging markets.

Related: Services PMI shrinks to weakest since 2009

The EMI rose from 49.5 in July to 50.7 in August, the first rise in the headline figure since March.

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The improvement in August was largely due to modest improvements in business conditions in China and Russia, which helped it offset a steep deterioration in India and a marginal worsening in Brazil, HSBC said.

Of the four largest emerging economies, China and Russia posted mild increases in output following declines in July. Brazil registered a further marginal drop in activity, while India posted the steepest rate of decline since March 2009.

The report further said that manufacturing output was flat in August, as a fractional rise in China PMI was weighed down by declines in other Asian economies and Brazil. Meanwhile, growth of services activity remained weak.

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"A group of large emerging economies including India, Indonesia, Brazil and Turkey are grappling with deeper supply -side problems, owing to low domestic savings, infrastructure bottlenecks and loss of competitiveness with rising unit labour costs," HSBC Chief Economist, CEE and Sub-Saharan Africa Murat Ulgen said.

According to Frederic Neumann Co-Head of Asian Economic Research "Asian manufacturers can exhale amid better orders but FX turmoil showing in India and Indonesia, which aren't out of the woods yet."

Meanwhile, employment declined further in August. The manufacturing workforce shrank for the fourth month running, while service sector staffing declined for the first time in over four years, albeit marginally.

Inflationary pressures, however, picked up slightly in August, with input prices increasing at the fastest rate in six months. Moreover, output prices rose for the first time in five months, HSBC said.

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