The HSBC Emerging Markets Index, a monthly indicator derived from the Purchasing Managers Index surveys, rose from 53 in December to 53.9 in January – the highest figure since February 2012, and only slightly lower than the seven-year long-run average of 54.2.
Data broken down by broad sector showed that growth was broad-based across service providers and manufacturers, as the latter posted a third successive month of expansion and the fastest pace of growth since May 2011. Meanwhile, the service sector registered the strongest growth in four months.
New business growth in emerging markets accelerated to a 22-month high in January. Manufacturing new orders rose at the fastest rate since April 2011, and across a broad base of economies. Only Egypt, South Korea, the Czech Republic and Poland posted declines in January.
Cost pressures in emerging markets were at their strongest in three months in January. The rate of input price inflation at service providers eased slightly, while manufacturing input cost inflation hit a 15-month high. Employment growth was maintained in January, continuing the trend shown since August 2009. Manufacturers raised headcounts for the second month running, the first back-to-back increase in 17 months.
Global head of emerging markets research Pablo Goldberg said that after a difficult 2012, economic conditions in the emerging markets are continuing the improvement which began last August.
“Both manufacturing and service readings suggest economic activity is not just being supported by resilient domestic conditions, but also now by a pick-up in new export orders,” he explained. “While the strongest readings continue to come from the services sector, which has proved to be quite resilient to a more challenging external backdrop, the good news is the pick-up in manufacturing activity.
“Furthermore, the recovery in the manufacturing sector appears to have legs, as business expectations for a year out are also at their highest level for nine months. Central to this is the turnaround in the outlook for China, which is slowly pulling the rest of Asia with it. Countries closer to the ailing eurozone are still struggling.”
Manufacturing output in China rose at the strongest rate since March 2011 in January, supported by new order growth accelerating to a two-year high. Data signalled higher new export business following December’s fall, as some firms noted improving demand from US and European markets.
Brazil’s manufacturing sector gained momentum in January, posting the strongest output growth in nearly two years. Furthermore, firms increased their staffing levels for the first time in 10 months.
Mexican manufacturers continued to outperform their counterparts in Brazil, albeit to a lesser extent than in recent months. As was the case throughout 2012, the Output Index for Mexico was higher than that for Brazil, but the gap narrowed to a new low in January.
Goods production in India rose at the slowest rate in three months, amid evidence from the survey panel that ongoing issues with the supply of power had restricted operations. This contributed to a rise in backlogs – India registered the strongest increase in manufacturing backlogs of all economies covered except Saudi Arabia.
Manufacturers in southeast Asia fared less well than other emerging markets in January. Indonesia posted a fall in production for the first time in seven months, albeit at a marginal pace, and firms shed staff for the third month running as new orders stagnated. Meanwhile in Vietnam, manufacturing output rose only modestly, and new export orders declined for the ninth month running.
Manufacturing downturns in Poland and the Czech Republic continued in January but, as with the eurozone, showed signs of easing. Output stabilised in Poland and fell only modestly in the Czech Republic, although both countries registered further declines in new orders and exports.
Russian manufacturing production growth recovered some momentum from December’s nearstagnation, but remained below-par. The near-term outlook looked bright as new order growth reached a 22-month high, while cost pressures weakened further.