The global economy is entering dangerous territory. Concerns about US and eurozone debt challenges remain centre stage – and rightly so. But increasingly worrying is what’s happening in emerging markets.
Since the global financial crisis, these markets, led by China, have been the primary force for economic growth. So much so that such countries as Brazil, Turkey and India are in danger of overheating.
Many developing nations are working to stem growth in an effort to prevent runaway inflation – an objective that seems to be succeeding, with input-cost inflation in emerging markets at its tamest in two-and-a-half years, according to HSBC.
At the same time, however, the same bank’s data point to the weakest level of emerging markets growth in two years. The HSBC emerging markets index, which uses purchasing managers’ index data, dipped to 54.2 in the second quarter, down from 55 in the three months before and below the long-run series average of 54.8.
The moderation in economic activity is evident across all regions, led by a weaker increase in manufacturing production and reduced export orders in China, Brazil and Russia.
The big unknowns are how long the slowdown will last and how severe it will be.