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India Expands More Than China In April-June Quarter
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The HSBC Emerging Markets Index (EMI) slipped to 53.0 in the second quarter of this calender year, from 53.6 in the January-March period, as a relatively better performance from the services sector was offset by only modest growth in manufacturing in the emerging market economies.
The survey reveals a two-speed growth picture, within the developing world, with Brazil and China expanding more slowly than India and Russia, the other two members of the BRIC quartet of big developing economies.
That was especially so in manufacturing, with Chinese factory output declining for the fourth straight quarter while Brazilian manufacturing fell back into contraction after improving in the January-March period.
Even Poland, the only European Union state to escape recession in the post-Lehman period, saw production fall for the first time since the global crisis.
With developed economies in trouble, demand for goods produced by emerging market manufacturers on global markets also continued to weaken in the April to June quarter, with new export business decreasing for a second successive quarter.
Brazil and China noted declines in new export orders while Poland and the Czech Republic posted the sharpest drop, victims of the euro crisis on their doorstep.
India and Russia however enjoyed a rise in new export orders along with Turkey and South Korea.
While Brazil and China saw new export orders decline, India and Russia witnessed rise in export orders. Expansion were also seen in Turkey and South Korea.
However the subdued growth and export picture is making emerging market companies hesitant to hire new staff, the survey found. HSBC noted that a fall in employment numbers in China for the first time in 13 quarters was of particular concern.
The bright spot in the quarterly surveys has been the services sector which has stayed relatively buoyant for over a year. But services activity also grew at a sub-par rate in the second quarter, with the overall expansion among the weakest recorded in the past three years, HSBC said.
Again this reflected weakness in Brazil which posted the slowest growth in three quarters while India and Russia grew at the slowest pace since the first quarter of 2011. China however posted the strongest expansion in one-and-a-half years.
The index is calculated using PMI data produced by Markit.
Although the HSBC EMI, which is based on 21 PMI (Purchasing Managers' Index) surveys conducted across 16 emerging markets, stayed above the 50-mark that differentiates growth from slowdown, HSBC noted that the global economic condition is posing strong headwinds for them.
"The protracted nature of the eurozone crisis will continue to pose strong headwinds for the emerging economies with financial deleveraging and export trade channels providing powerful undercurrents dragging down economic performance of emerging markets," HSBC's Chief Economist for Central and Eastern Europe and sub-Saharan Africa Murat Ulgen said.
The manufacturing sector remained the greatest drag on activity, which still remains considerably below pre-crisis levels despite an improvement on the first quarter of 2012.
"This quarter there is a visible slowdown in the emerging giants comprising the majority of the BRICs, exacerbating a year-long pattern of below-trend growth rates for the emerging world," Ulgen said.
Emerging market growth remains resilient in the face of excessive external uncertainties and with plenty of ammunition at their disposal to deploy, they are set to stay on the right track, Ulgen added.
Looking ahead, emerging market service providers remain confident about the one-year business outlook, with the degree of optimism the highest in two years.
However, the extent of positive sentiment remains lower than in any quarter prior to the onset of the financial crisis. Of the big-four emerging markets, service sector optimism was strongest in Brazil and India, the HSBC report added.