Lower Chinese output puts brakes on emerging market expansion in June: HSBC

Thu Jul 4, 2013 7:07pm EDT
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LONDON (Reuters) - Business activity across emerging economies was the slowest in four years in June with manufacturing and new orders shrinking, a purchasing managers' survey showed on Friday.

Sentiment in China's services sector was the weakest since 2005 while manufacturing contracted in China, India, South Korea, Taiwan and Vietnam, dragged down by falling output and new orders. The report pointed to a slide in the Japanese yen as a factor in falling competitiveness in South Korea.

The composite HSBC Emerging Markets index for services and manufacturing fell to 50.6, the lowest since 2009, and only just above the 50 mark that signals growth. It fell from 51.4 in May.

"It is the softest reading we have had in more than four years, though it is not quite as bad as the depths we saw during the financial crisis," said Stephen King, global chief economist at HSBC.

"Having had a few good years, emerging markets are now facing threats that were not there previously (including) the fear of tapering of quantitative easing from the Federal Reserve."

The HSBC survey, which collects data from purchasing managers at about 7,500 firms in 16 emerging markets.

The survey showed the emerging market index's weakest composite result since the global financial crisis in 2008/09 when, for a fleeting moment, the index dropped to 42.0.

For the first half of this year, the manufacturing sub-component was particularly soft at 49.5, implying an overall manufacturing contraction across emerging markets for the first time since October 2012.

In China, manufacturing shrank after growing slightly in May.   Continued...

A worker welds inside a factory in Chongqing municipality, June 25, 2013. REUTERS/China Daily