The emerging markets' growth continued to moderate in the third quarter as sustained expansion in service sector activity was offset by a fall in manufacturing as global demand softened, said a report.

Th recovery in the emerging markets remains elusive as sluggish global trade hits growth, according to the SABB/HSBC Emerging Markets Index (EMI).

The index slipped to 52.1 points from 53.2 in the second quarter, with the rate of emerging market growth at its weakest for a year and its second-slowest since the second quarter of 2009, when the global economy began to recover from the 2008 financial crisis.

Despite continued growth, service sector expansion touched its weakest level for a year while manufacturing output declined marginally, at a similar rate to the previous contraction seen in the final quarter of 2011.

Among the four largest emerging economies, Brazil and China underperformed India and Russia in the third quarter, the report said.
 
Brazilian private sector firms noted a broad stagnation in both manufacturing and services activity. Service sector output failed to expand for the first time in three years while flat manufacturing at least represented a stabilization following a modest decline during the second quarter.

Chinese output rose only marginally, a consistent trend since the second half of 2011, while goods production fell for the fifth successive quarter.

Dr Murat Ulgen, HSBC’s chief economist for Central and Eastern Europe and sub-Saharan Africa, said: "Emerging economies are being impacted by the misery of the developed world as the deteriorating global trade cycle, weaker external demand and falling new export orders hit manufacturing output and the services outlook."

The loss of momentum also partly stems from domestic policy choices for restraint after a very resounding recovery in late 2009 and 2010. The end result is disappointment as the emerging world, in particular China, continues to surprise to the downside. So where do we go from here?," Dr Ulgen wondered.

"We are still tempted to see the loss of momentum in the emerging world as cyclical, rather than structural," he remarked.

"As such, monetary and fiscal stimuli will likely have an impact on activity although this may take longer than usual as the structural problems in the developed world continue to weigh on trade and undermine the confidence of consumers and businesses around the globe. The much vaunted recovery in emerging markets may be delayed as a result," he added.-TradeArabia News Service