Trends in emerging market economics remain mixed – with signs of slowing activity in India and China countered by recoveries in Brazil and Russia (as these economies emerge from deep recessions), explains he research team at NAB.
“Emerging economies received a boost from trade activity from late 2016 to early 2017, however export volumes have plateaued since this time, while growth in export values has stalled. This might suggest limited upside to economic growth in the short term – having seen a modest improvement in the five largest emerging markets in early 2017.”
“Following strong rates of growth across 2016, the pace of expansion in India’s industrial and infrastructure output slowed considerably in 2017 – with industrial output contracting year-on-year in June with a modest recovery in July. The economy is also adjusting to the introduction of the GST in July, with PMI surveys slumping in July but returning to positive territory for both manufacturing and services in September. The Reserve Bank of India lowered its economic growth and raised its inflation forecasts recently, highlighting supply side challenges for the economy.”
“While China’s economic growth was relatively strong and stable across the first half, recent indicators point to a softening. This was particularly the case for fixed asset investment, which contracted in real terms in August – the weakest result since late 1995. That said, indicators of China’s services sector – such as retail sales and air travel – remain robust. Softer industrial trends could result in weaker growth in H2 2017, in line with our forecasts.”
“Industrial output for emerging markets has been growing near trend levels. According to the CPB measure, quarter-on-quarter output rose by 1.1% in Q2 (up from 0.7% in Q1) and this edged up to 1.2% in the three months to July – roughly the average growth rate since 2010. However export volumes have plateaued in recently (contracting 0.5% qoq in Q2 and increasing 0.2% in the three months to July).”
“Slower export volumes are a negative for trade exposed East Asia and Latin America. Output growth in Asia softened across the middle of the year (following robust rates in early 2017), while recoveries in Brazil and Argentina have returned Latin American output to positive territory. Strength in export values appear to be commodity price related, and some momentum has been lost recently.”
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