Manufacturing growth in the emerging markets slowed sharply from a record pace set in first quarter of this year, said a report.

Although output remains above the long-term average, it is below the average seen before the financial crisis, an HSBC Emerging Markets Index (EMI) showed.

This easing reflects a moderation in the rate of growth of new orders, especially for manufacturing exports. And with developed nations showing few signs of domestic demand and about to enter a period of fiscal retrenchment, world trade is likely to soften further, said the report.

In the second quarter of this year, the HSBC EMI dropped to 55.8, down from 57.4 in the first quarter of the year.

However, it remains significantly higher than in the fourth quarter of 2008 when the index hit a trough of 43.4.

'We are in a new phase of global economic development,' said HSBC chief economist Stephen King.

'Export gains for companies in the emerging world have failed to sustain the momentum seen in earlier quarters. The stellar recovery in economic activity across most of the emerging markets seen since the first half of last year finally hit a bump in the road.”

'The good news is that emerging markets, having escaped the legacy of excessive debts, should not face the same kinds of financial constraints which will keep the lid on economic activity in the developed world in the years ahead,' he said.

'Services expanded at a faster rate than manufacturing for the first time since the onset of the financial crisis, suggesting that growth has become better balanced and indicating that domestic demand in the emerging world is holding up well even in the light of a faltering manufacturing performance,' he added.

'Overall growth in both output and new orders weakened in China and Brazil but gathered pace in India and Russia. Indeed, China, for several quarters the main driver of emerging markets growth, has lost some of its shine,” King continued.

“Exports across emerging nations grew at the slowest pace since the third quarter of last year, with China recording an especially steep downturn. Russia and Eastern Europe were the exceptions to the rule,' he concluded. – TradeArabia News Service