The emerging market growth slowed to its weakest level in two years in the second quarter reflecting global economic fragility, the consequences of Japanese tsunami and impact of recent inflation, said a report.

Price pressures eased sharply against a backdrop of continued monetary tightening by central banks across the emerging world in response to menacing inflationary pressures, according to the SABB HSBC Emerging Markets Index (EMI).

The EMI is a quarterly economic index developed and published in Saudi Arabia by HSBC Group and The Saudi British Bank-SABB.

The Q2 signalled the most acute easing of input cost inflation for two-and-a-half years, the report added.

The SABB HSBC EMI dipped to 54.2, down from 55 in the first quarter and edging below the long-run series average of 54.8.

The moderation in overall activity growth reflected a weaker increase in manufacturing production, with the pace of expansion easing to the slowest in three quarters.

Meanwhile, service providers recorded a slightly faster rise in business activity, albeit one that was the second-slowest since the second quarter of 2009.

The rates of production growth eased across the majority of manufacturing sectors monitored by the survey, with South Africa and Singapore the two exceptions.

In emerging Asia, China saw growth slow to the least marked in nine quarters while output rose at the weakest rates for two quarters in Taiwan and South Korea.

Even India recorded a slower rise in manufacturing output, although the rate of growth remained substantial, and by far the healthiest of all emerging markets monitored by the survey.

In Europe, particularly marked slowdowns were registered in Turkey and the Czech Republic while Russia saw activity growth moderate to a five-quarter low, the EMI said.
 
The weaker increase in manufacturing output in part reflected a lessening in new order growth, which in turn was linked to a slowdown in the rate of expansion in new export orders.

Of the largest emerging markets, Brazil, China and Russia all recorded reductions in new export orders. Meanwhile, India reported the slowest pace of growth for one and-a-half years, and rates of expansion eased noticeably in Taiwan and South Korea.

Only marginal increases in exports were seen in Turkey and Poland, the SABB HSBC index stated.

Despite easing to a six-quarter low, India again recorded the fastest rate of growth of all emerging market service sectors monitored by the EMI, followed closely by Russia, it added.-TradeArabia News Service