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BW Businessworld

India Expands Faster Than China As Emerging Mkts Slow

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India expanded at a faster rate than China during June, even as growth in emerging market economies during the month was the lowest since the global financial crisis in 2008-09, an HSBC survey said on Friday, 5 July 2013. In fact, the sentiment in China's services sector was the weakest since 2005.

The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI surveys, sank to 50.6 in June from 51.3 in May, signalling the weakest increase in output since May, 2009.

Business activity across emerging economies slowed in June with manufacturing and new orders shrinking, the HSBC purchasing managers'survey showed on Friday.Long term, HSBC said 'growing pains' would subside as China rebalances its economy away from exports and infrastructure to domestic consumption. That should help establish China as a lender to other emerging nations and build on trade links between China and other parts of Asia, sub-saharan Africa and Latin America.

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The latest figure was the lowest in over four years as the Chinese manufacturing output witnessed a decline as did production in other Asian economies, HSBC said.

Among the largest emerging economies, output stagnated in China, registering a marginal fall for the first time since August 2012. Meanwhile, output stagnated in Russia, while India and Brazil both posted weak rates of growth.

During June, the HSBC composite index for India, which maps both manufacturing and services sectors, stood at 50.9, whereas for China it was 49.8, Brazil 51.1 and Russia 50.1.

HSBC cut China's 2013 growth forecast to 7.4 per cent from more than 8 per cent at the beginning of the year as a result of anticipated 'supply side' reforms. New orders fell for the first time since March 2009 in India, though export business rose at the sharpest rate this year as demand from foreign clients strengthened.

An index measure of above 50 indicates expansion. Commenting on the findings, HSBC Co-Head of Asian Economic Research, Frederic Neumann said: "Asia is feeling the pinch from jittery financial markets. The road ahead looks bumpy with manufacturing slowing further."

Meanwhile, the volume of new business in global emerging markets was little-changed from one month previously, weighed down by a fall in manufacturing new orders and the rate of employment growth in emerging markets was marginal in June.

With regards to business expectation for the next 12 months, HSBC said respondents reflected weaker sentiment in both manufacturing and services sector.

The HSBC Emerging Markets Future Output Index is a new series tracking firms' expectations for activity in 12 months' time declined in June.

However, the longer-term prospects for the emerging world remain "encouraging", HSBC said adding that the latest setbacks should be seen primarily as "growing pains".