India and Brazil pick up pace as exports boost output growth

Tim Wallace
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EMERGING economies expanded strongly in the first quarter, and have plenty of monetary and fiscal “ammunition” to bolster growth should it falter – in stark contrast to European economies, a report by HSBC argued yesterday.

Manufacturing production accelerated in India and Brazil, and grew at a slightly slower pace in Russia, the study found, though Chinese output fell for the third consecutive quarter.

The rate of expansion in services hit a four-year high in Brazil, and also expanded in India and Russia.

Across the economy as a whole, China saw new export orders fall at its fastest pace for 12 quarters.

India was the only BRIC to report rising new export orders, as demand remains weak in the Eurozone.

Those results take HSBC’s emerging market index to 53.4, up from 52.4 in the previous quarter and further above the “no change” level of 50.

Employment as a whole increased for the eleventh consecutive quarter, though at its slowest pace in two and a half years.

However Brazil’s labour market stood out as an exception, with job creation hitting a seven-quarter high.

Economists believe this accelerating growth point to healthier long-term growth compared with developed markets, and that they are in a better position to support growth if the economies wobble.

“Whereas interest rates are down at more or less zero in both the US and Europe, emerging nations still have plenty of available ammunition including rate cuts, reserve ratio cuts and, if necessary, more fiscal stimulus,” said HSBC economist Stephen King.

“However, emerging nations still have to perform a juggling act, balancing the risks of too little growth against the threat – if not yet the reality – of too much inflation.”