• HSBC Emerging Markets Index: 51.5 (prior 52.5)
• Chinese growth slows
• Renewed downturns in Russia and Brazil
The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMITM surveys, fell to 51.5 in October, from 52.5 the previous month, signalling weaker output growth across global emerging markets. The current sequence of overall expansion now stretches to 15 months, but the latest increase was the weakest since May. The EMI has trended at 53.8 since its inception in November 2005.
The weaker growth momentum at the start of the final quarter was the result of slower service sector expansion, as growth of activity eased from September's 19-month high. The rate of growth in manufacturing output was unchanged from September's modest pace.
The four largest emerging economies all fared worse in terms of output in October. China registered the weakest rate of expansion since July, while Indian growth slowed to a five-month low. Brazilian private sector output declined for the sixth time in seven months, and at the fastest rate since May 2009. Finally, Russian output fell for the first time in five months.
New business inflows across emerging markets globally remained subdued in October, rising at the weakest rate in five months. The volume of outstanding business declined for the fourth month running. Employment growth remained marginal.
Inflationary pressures moderated in October. Input prices rose at the slowest pace since June 2013, while output prices fell slightly for the first time in seven months.
Business expectations
The outlook for global emerging markets improved slightly but remained relatively weak in October. The HSBC Emerging Markets Future Output Index tracks firms' expectations for activity in 12 months' time, and improved slightly to a three-month high on the back of stronger service sector sentiment. Among the largest emerging markets, output expectations picked up in India and Brazil but deteriorated in China and Russia.
Comment
Chris Williamson
Chief Economist, Markit
"Emerging market growth remained disappointingly lacklustre in October, losing further momentum to show the weakest pace of economic expansion since May. Slowing inflows of new business also bodes ill for growth to slide closer to stagnation in coming months.
"There therefore seems like little chance of any imminent change from the scenario seen over the past year-and-a-half, during which the lower gear into which the emerging market economies as a whole have moved has acted as a major dampener on global economic growth.
"The surveys are indicating that emerging market economic growth is likely to struggle to exceed 5% in the fourth quarter, in stark contrast to the double-digit rates of expansion commonly seen prior to the financial crisis.
"Thought there are some bright spots, at least in the sense of economic conditions stabilising in some countries, the malaise is broad-based across the world's major emerging markets. Brazil is facing another quarter of economic decline, as the PMI signalled the steepest deterioration of business conditions for just over two year, and Russia has also slipped back into contraction for the first time in five months. Growth meanwhile slowed in both China and India, dropping worryingly close to stagnation.
"Perhaps the brightest light is Mexico, where producers appear to be benefitting from strong growth across the rest of North America."
Regional highlights: www.twitter.com/HSBC_EMI_PMI
Simon Williams
Chief Economist, CEEMEA
"Encouraging signs of stabilisation across much of CEEMEA. Oil-rich Gulf states continue to outperform; Russia remains our prime concern"
Frederic Neumann
Co-Head of Asian Economic Research
"Not exactly stellar, but things are steady in Asia. Export orders softening again, but local momentum still robust. Easing price pressures help"
Andre Loes
HSBC Chief Economist, LATAM
"Remarkably contrasting paths; Brazil falling to the lowest since 2009, Mexico accelerating to a superior gear"
Manufacturing
Chinese manufacturers again signalled only a fractional improvement in overall operating conditions in October. Output and new business both expanded at the slowest rates in five months, while new export order growth weakened to a modest pace.
October data signalled a further loss of growth momentum in Taiwan's manufacturing sector. Production rose at the slowest rate in 13 months, while total new orders and new export orders also expanded at weaker rates.
South Korean manufacturers signalled a decline in output for the seventh month in a row in October, though the rate of decrease eased. Total new orders also fell alongside a solid decline in new business from international markets.
Operating conditions in the Indonesian manufacturing sector worsened in October, reversing the modest improvement reported during September. Contractions in output and new orders mirrored the overall deterioration in business conditions.
Business conditions in the Vietnamese manufacturing sector improved slightly in October as output and new orders increased and firms took on extra staff at the strongest pace since January. Meanwhile, suppliers' delivery times shortened for the first time in ten months.
Continuing the trend observed throughout the past year, business conditions in the Indian manufacturing sector improved in October. Underpinning the latest improvement was accelerated growth of output and new orders.
Brazilian manufacturing production fell in October, as goods producers adjusted their output according to the generally depressed state of the market and the negative influence of the election. In contrast, Mexican manufacturers indicated a further rebound in their overall business conditions during October, with output and new order volumes both rising at the fastest pace since the start of the year.
Turkey's manufacturing sector registered improving business conditions for the third month in a row in October. Moreover, output and new orders increased at stronger rates than in September, while new export business stabilised.
The Russian manufacturing sector continued to register growth of output at the start of the fourth quarter. That said, expansion of new orders lost momentum, and firms continued to cut staffing levels. New export business fell sharply since September and the latest data also signalled an intensification of inflationary pressures linked to the weakening ruble.
Growth of output and employment at Czech manufacturers remained strong in October despite a weaker rise in new business. New export growth remained sharp as demand from Western European markets offset losses from Russia, Ukraine and Poland.
PMI data signalled a recovery in business conditions in the Polish manufacturing sector at the start of the fourth quarter, following a brief downturn in the third quarter. Growth of both output and new orders resumed, and employment continued to rise.
Middle East & Africa
Output, new business, purchasing activity and employment in the UAE non-oil private sector all rose at survey-record rates in October, while average wages/salaries increased at the strongest pace since the series began in August 2009. Average purchase prices rose at the fastest rate in just over two-and-a-half years. New export business bucked the wider trend in new work, registering the slowest expansion since January - albeit a strong overall pace nonetheless.
Latest data showed that Saudi Arabian non-oil output increased during October at a sharp pace, but was restricted by competitive pressures and signs of slower market demand. While new orders continued to rise markedly, there were reports that demand was rising to a lesser extent than seen in previous months, both at home and abroad.
Survey data signalled a continuation of the recent upturn in Egypt's non-oil private sector at the start of the fourth quarter. Output and new orders continued to rise, albeit at weaker rates, and companies increased their workforce numbers for the second month running.
South African PMI data signalled stronger growth of both output and new orders in October, with the respective rates of expansion the best in 23 and 31 months, respectively. Anecdotal evidence suggested that higher demand, new customers and increased marketing activity accounted for much of the latest rise in new work.
Business expectations
The Composite Future Output Index for Russia sank to a new low in October, on the back of the worst expectations in the service sector since December 2008. Service sector companies reported that political and economic uncertainties had weighed on their expectations during the month.
Among manufacturers, output expectations were strongest in Indonesia, Brazil and Mexico, while the weakest sentiment was registered in Taiwan, China and Russia.