China output offsetting slower growth: HSBC survey

Stronger manufacturing and services output in China masks slower growth in Brazil, Russia and India

Stronger manufacturing and services output in China helped lift emerging market business confidence in March, masking slower growth in Brazil, Russia and India, a monthly purchasing managers' survey showed.

The HSBC Emerging Market Index (EMI) survey, which collects data from purchasing managers at about 7,500 firms in 16 emerging markets, showed on Thursday that strong manufacturing output from China helped boost growth in neighbouring south-east Asian economies including Korea, Taiwan, Indonesia and Vietnam.

HSBC's composite manufacturing and services PMI for the world's second-largest economy increased in March to 53.7 from 51.4 the previous month.

That helped lift the HSBC EMI index to 52.6, from 52.4 the previous month.

"Manufacturing across emerging markets showed signs of stabilisation in March after cooling the previous month," said Frederic Neumann, Co-Head of Asian Economic Research at HSBC, adding that Lunar New Year holidays had dampened output previously.

Neumann said economies especially sensitive to changes in demand in China, including Korea, Taiwan, Indonesia and Vietnam, also showed gains in March.

Export orders PMIs above 50 - the level which separates expansion from contraction - were recorded in 14 of 16 countries surveyed, with South Korea and Vietnam posting expansions compared with contractions the previous month.

Manufacturing output increased in India and Brazil, but faltered in Russia, the survey showed.

"None of this is to suggest that the emerging markets boom is about to run out of steam. But the latest Emerging Markets Index highlights, yet again, the growing importance of China amid the ongoing drag from more developed economies in the West," Neumann added.

A new indicator, the HSBC Emerging Markets Future Output Index, which tracks firms' expectations for activity in 12 months' time showed stronger sentiment in China.

The survey showed the business expectations outlook for India was the strongest overall among the four BRIC economies - Brazil, Russia, India and China - while expectations rose for a third consecutive month in March in China.

Manufacturing output expectations for the next 12 months were the strongest in Saudi Arabia, Indonesia, Mexico, the United Arab Emirates and Vietnam, the survey showed.

The weakest outlooks for manufacturing were registered in Russia, Brazil, Egypt, South Korea and the Czech Republic.

The index is calculated using data produced by Markit.