Emerging market output expands in August-HSBC

LONDON, Sept 5 Wed Sep 4, 2013 7:01pm EDT

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LONDON, Sept 5 (Reuters) - Business activity across emerging economies edged back into expansionary territory in August, staying relatively subdued, though expectations rose to a five-month high, a survey showed on Thursday.

The composite HSBC Emerging Markets index for services and manufacturing rose to 50.7 in August from 49.5 in July, when it dipped below the 50 mark that separates growth from contraction for the first time in four years.

But August's reading was the third-lowest in more than four years. Manufacturing output was flat and growth in services activity remained weak, HSBC said.

China and Russia recorded mild increases in output following declines in July. Brazil suffered a slight drop, while India posted the steepest rate of decline since March 2009.

The HSBC Emerging Markets Future Output Index, measuring business expectations, rose for the second month running to its highest since March, though it remained below its historic 17-month trend level. Among the BRIC economies, sentiment was strongest in Brazil and weakest in China.

"Emerging economies are still faced with headwinds, which is evident in weak export orders, despite signs of life in the industrialised world," said Murat Ulgen, HSBC's chief economist for central Europe and sub-Saharan Africa, in a statement.

Ulgen added that China, the world's second-largest economy, expanded last month, but large emerging economies like Brazil, India, Indonesia and Turkey were suffering from "supply-side problems, owing to low domestic savings, infrastructure bottlenecks and loss of competitiveness with rising unit labour costs".

Emerging Europe, however, is benefiting from a brighter outlook for the euro zone.

The Czech Republic posted a sharp rise in new orders, boosted by new export business. Polish manufacturing output, new orders, new export business and purchasing activity all grew at faster rates in August, and employment increased for the first time in 12 months.

"Central Europe is piggybacking on the euro zone recovery, looking better in comparison," Ulgen said.

The HSBC survey collects data from purchasing managers at about 7,500 firms in 16 emerging markets. The index is calculated using data produced by Markit.

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