Raising doubts over prospects of sustained global economic recovery from the financial crisis, the business activity across emerging economies contracted for the first time in over four years in July mainly due to the decline in manufacturing, while services activities remained stagnant. The composite HSBC Emerging Markets index for services and manufacturing fell to 49.4 in July from 50.6 in June. For the first time since April 2009, the index fell below the 50 mark that separates growth from contraction.
The HSBC survey, based on a review of about 7,500 firms in 16 emerging markets, highlighted that new business in emerging markets also recorded its first decline in over four years as India, China and Brazil all received less new work in July, while Russia registered its slowest growth in nearly three years. Further, it highlighted growing divergence between activity in the developed world and emerging economies and said that presently the main risk for emerging economies is that the cyclical downturn in manufacturing and softer service sector activity which will ultimately lead to a weaker job market. Employment across emerging markets was broadly unchanged and inflationary pressures remained weak in July.
Meanwhile, the HSBC index for business expectations showed some signs of recovery as emerging market future output index rose slightly from June's low but was still the second-lowest figure in the last 16 months. Among the four largest emerging economies, sentiment was weakest in China.
