Emerging market growth in third quarter best since Q1 2013
Key points
• HSBC Emerging Markets Index: 52.5 (prior 52.4)
• Chinese growth again driven by services
• Brazil posts higher output for first time in six months
The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMITM surveys, edged up from 52.4 in August to an 18-month high of 52.5 in September. On a quarterly basis the EMI averaged 52.2 in Q3, the best since the first quarter of 2013.
Latest data signalled that services activity rose at a stronger rate than manufacturing output for the second month running. This was driven by the trend in China, as services activity in Brazil, India and Russia rose at either weak or marginal rates. Among goods producers, those in the Czech Republic posted the strongest growth in September, while declines were registered in Brazil, South Korea and Poland.
New business growth remained close to June's 15-month peak, but remained slower than the average over the nine-year series history. Consequently, outstanding work declined slightly for the third month running, and employment remained broadly unchanged.
Input price inflation slowed further to a 15-month low in September. Manufacturing continued to record weaker cost pressures than services, and four economies posted outright declines in manufacturing input prices, namely China, Poland, Brazil and South Korea. The strongest rate of manufacturing input price inflation was again registered in Russia, followed by Turkey. Russia also posted the strongest rate of service sector input price inflation.
Business expectations
The outlook for global emerging markets remained relatively weak in September. The HSBC Emerging Markets Future Output Index tracks firms' expectations for activity in 12 months' time, and was little-changed from August's three-month low at the end of the third quarter. Notably, output expectations in the Russian private sector were the weakest since the composite manufacturing and services series started in April 2012, surpassing the previous low set in March.
Comment
Chris Williamson
Chief Economist, Markit
"The September PMI surveys found welcome signs of a renewed upturn in emerging market economies gaining traction, with business activity growing at the fastest rate for a year-and-a-half. The third quarter saw growth in China and India rise to the fastest since early-2013, and Brazil is showing signs of lifting out of its recession. The overall pace of growth remains only modest, however, especially in manufacturing, and well below pre-crisis rates, suggesting emerging markets remain something of a drag on global economic growth and trailing the average rate of expansion signalled by the PMI surveys in the developed world.
"Most notable is the improvement in China since the downturn seen earlier in the year, with manufacturers benefitting from a revival in exports and service sector companies also enjoying a strengthening of domestic demand, most likely arising from the government's mini-stimulus measures. The PMI suggests that economic growth in China picked up in the third quarter to the fastest since the first quarter of 2013.
"Growth eased in India in September but remaining much improved on earlier in the year. The average PMI reading in the third quarter was the highest for a year-and-a-half, pointing to a further acceleration of annual GDP growth from the 5.7% pace seen in the second quarter.
"There are also signs of Brazil pulling out recession. Business conditions improved, albeit only marginally, for the first time in six months in September, with an upturn in new orders hopefully paving the way for a further upturn in the fourth quarter. Brazil's GDP fell 0.6% in the second quarter after a 0.2% decline in the first three months of the year.
"Russia meanwhile continued to eke out marginal growth in September, but saw inflows of new business slow to near-stagnation, suggesting economic growth momentum is waning from an already lacklustre pace."
Regional highlights: www.twitter.com/HSBC_EMI_PMI
Murat Ulgen
Global Head of Emerging Markets Research
"Mixed picture in CEEMEA; Turkey and South Africa are doing better, Russia still faces headwinds from employment and export orders"
Frederic Neumann
Co-Head of Asian Economic Research
"Plenty of fog in Asia. Activity is slowing, but export orders are holding up. All eyes on China, where manufacturing is just above the water line"
Andre Loes
HSBC Chief Economist, LATAM
Mexico accelerates manufacturing expansion; Brazil shows first overall expansion since March, though 3Q still displays a contraction"