HSBC Emerging Markets Index (EMI) fell for the third month running to 51.1 in February

Emerging market growth slows further

The HSBC Emerging Markets Index (EMI) fell for the third month running to 51.1 in February, from 51.4 in the first month of 2014. EMI, a monthly indicator derived from the PMI surveys eased signalling the weakest growth in global emerging market output since last September, with the EMI also remaining well below its long-run trend level of 54.0.

The moderation in growth in the latest period reflected the weakest rise in manufacturing output in five months, in contrast to January when the slowdown reflected weaker expansion in the service sector. Services activity in emerging markets rose at a slightly stronger rate in February, albeit one that remained relatively weak.

Manufacturing output in emerging markets was weighed down by contractions in China, Russia and South Korea. Growth slowed in Mexico and remained weak in Brazil. In contrast, Poland and the Czech Republic posted sharp increases, as did Taiwan.

Conditions are likely to remain subdued in March, with incoming new business rising at the slowest rate in five months. Reflecting this lack of pressure on capacity, employment was broadly unchanged over the month and backlogs of work declined further. Finally, inflationary pressures remained weak overall, despite evidence of cost pressures in Brazil, Russia, Turkey and the Czech Republic linked to exchange rates.

The HSBC Emerging Markets Future Output Index is a new series tracking firms? expectations for activity in 12 months? time. The index picked up in February to an 11-month high, reflecting improved sentiment in both manufacturing and services. The goods-producing sector retained the more optimistic outlook overall.

Among the largest emerging markets, China posted the strongest sentiment in 11 months (manufacturing and services combined). Brazil posted the strongest overall output expectations, as it has eight times in the past nine months. Russia held the least positive expectations in February, followed by India.

Production growth in India accelerated on the back of a stronger rise in incoming new work. The pace of output expansion was the quickest for a year. New orders increased at the fastest rate since February 2013.

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