Manufacturing output and new orders growth in emerging market economies recorded the highest expansion since Q2 2004, the latest HSBC Emerging Markets Index (EMI) shows.
The strong manufacturing result, combined with robust service industries data, reflects an economic outperformance compared to developed nations that reaffirms emerging markets as being at the vanguard of global economic recovery.
In the first quarter of 2010, the HSBC EMI rose to 57.4, up from 56.3 in the fourth quarter of 2009 and significantly higher than six quarters ago when the index hit a trough of 43.4. Manufacturing output rose to 58.6 from 56.5 and services business activity climbed to 56.5 from 56.1.
The improvement signalled the fourth consecutive quarterly increase in emerging markets manufacturing and service output and the fastest rate of expansion since the final quarter of 2007.
Stephen King, HSBC’s Chief Economist, said: “The latest HSBC EMI suggests that economic activity across the emerging nations is back to its best. And this performance is likely to continue. For North America and Europe, years of austerity lie ahead as nations attempt to regain control over fragile fiscal positions. Emerging nations mostly do not face the same constraints. However, the latest EMI readings also highlight future risks, most obviously stemming from inflationary pressures.”
Backlogs of work rose in Q1 2010, registering a slightly stronger increase compared to Q4 of last year. However, this growth is the largest seen in the four-and-a-half year history of the HSBC EMI series and suggests increasing numbers of companies will look to expand capacity in coming months.
China reported the largest growth in backlogs as measured across both manufacturing and services, followed by Brazil.
And the rate of new orders for manufacturers continues to grow. The rate of expansion in Q1 was substantial, having accelerated to the most marked since Q2 2004. New export orders increased across nearly all countries, with Russia the only exception. Strongest growth was recorded in Taiwan, followed by China, the Czech Republic, India and South Korea.
Inflation is still below that seen before the onset of the economic and financial crisis but average input costs rose to the greatest extent in six quarters during Q1 2010. The overall rise was led by manufacturing which saw input costs accelerate sharply from the previous quarter. As a result, overall output charges increased at the most marked rate since Q3 2008.
The HSBC EMI is calculated using the long-established PMI data produced by global financial information services company Markit. HSBC announced last year a partnership with Markit to sponsor and produce a number of emerging market PMIs.
The HSBC EMI will be released quarterly and is available via: www.hsbc.com/emergingmarketsindex
The next HSBC EMI will be released on 7 of July 2010.
