US, UK improve, BRIC nations suffer.
By R. Chandrasekaran
CHENNAI: Business activity in emerging economies shrunk in July, even as global business activity struck a 16-month high. However, the employment pace slowed globally.
The HSBC’s Emerging Markets Index dropped to 49.4 in July from 50.6 in June. However, JPMorgan’s Global All-Industry Output Index advanced to 54.1 from 51.2 in the same period driven by improvements in the largest economy, the U.S., and the United Kingdom.
Japan’s growth has eased in July compared to higher points recorded in the U.S. and Britain. However, business activity slipped in the BRIC nations, comprising of Brazil, Russia, India and China.
The emerging economies slipped below the 50.0 reading level for the first time since April 2009, hurt by fall in manufacturing output and stagnation in the services sector, according to an HSBC survey.
The two biggest economies in Asia, China and India, and Brazil, recorded a drop in new orders receipts, whereas Russia managed to grow but recorded the slowest pace in close to three years. India is the worst performer with the manufacturing and services sectors reading at 48.4 compared to China’s 49.5, Brazil’s 49.6 and Russia’s 50.1.
The HSBC survey also indicated that manufacturing sentiment continued to remain weak for the fifth straight month. However, business confidence in services rose modestly. Significantly, sentiment in China was the weakest. This is a not a good sign for the global economy.
Commenting on the data, Frederic Neumann, Co-Head of Asian Economic Research for HSBC, has reportedly said, “Emerging markets are not yet feeling a lift from stabilizing demand in the United States, Europe, and Japan.”
Globally, the economy has made a positive start to the third quarter of the calendar year. However, the index indicating changes in the employment scene slipped to 51.0 in July from 51.6 in June indicating the slower pace of hiring globally.
This has prompted senior economist of JPMorgan Joe Lupton to comment, “Although the stronger performance signaled is pleasing in itself, the structure remains uncomfortably uneven by region, particularly with regard to job creation.”
Domestic issues have hurt BRIC nations, thereby limiting their chances of participating in global confidence level.
To contact the author, email to rchandrasekaran@americanbazaaronline.com