Canadian Manufacturing

Manufacturing output stalling in China, India and Russia: HSBC

Tensions in the Ukraine have already had an impact on regional markets.



TORONTO—HSBC’s Emerging Markets Index fell for the fourth month running to 50.3 in March, from 51.1 in February, indicating only a marginal increase in private sector output across global emerging markets.

The HSBC EMI is a monthly indicator derived from the Purchasing Managers Indexes.

Since February, output has contracted in three of the four largest emerging economies. China posted a marginal decline for the second consecutive month while India slipped back into contraction.

“Asia had a wobbly start to 2014, no doubt. But drop in PMIs seems to be stabilizing amid tentative signs of export pick-up,” said Frederic Neumann, co-head of Asian Economic Research.

Russian private sector output fell at the fastest rate since May 2009.

Meanwhile services activity rose at the weakest rate since July 2013. A faster increase in Chinese service sector activity was offset by declines in Russia and India.

New business growth across global emerging markets eased to a fractional pace in March, and backlogs of work continued to decline. Subsequently, employment growth remained weak.

Input price inflation in emerging markets hit a nine-month low in March. Russia bucked this downward trend, seeing the strongest rise in input prices in three years—mainly due to the weakening ruble. In contrast, China posted a fall in average input prices for the third month running.

Business expectations

The HSBC Emerging Markets Future Output Index tracks firms’ expectations for activity one year ahead of time. The index fell back in March from February’s 11-month high, but was still the second-highest in the past seven months.

Manufacturing output expectations weakened while services sentiment improved.

However, tensions in the Ukraine have already begun impacting regional markets.

Among the largest emerging markets, Russia posted a substantial weakening in sentiment across both manufacturing and services.

“Russian business conditions deteriorate sharply on geopolitical tension. Turkey’s output growth also slows down, confirming weakness in consumption,” said Murat Ulgen, HSBC chief economist for Central and Eeastern Europe & Sub-Saharan Africa.

The composite series hit a record low, while the outlook in the service sector was the worst since December 2008. China posted a dip in output expectations from February’s 11-month peak, while sentiment in Brazil hit a four-month high.

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