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Emerging-market growth hits two-year low, says HSBC

Manufacturing production and exporter orders down; Inflation pressures ease

Emerging-market growth is at its weakest level for two years, according to a leading index, as monetary tightening by central banks to combat inflation has slowed the rate of expansion.

The HSBC emerging-markets index, which uses Purchasing Managers’ Index data, dipped to 54.2 in the second quarter of 2011, 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.

Action by monetary authorities across the developing world to tackle inflation is working, however, with price pressures down sharply.

Central bank measures have helped deliver the sharpest easing of input cost inflation for two-and-a-half years in these markets, according to HSBC.

“HSBC’s latest emerging-markets index confirms that, after a strong rebound in the immediate aftermath of the global financial crisis, the pace of activity in the emerging markets has faded,” says Stephen King, the bank’s chief economist.

He adds: “In many part of the emerging world, there has been a noticeable reduction in the growth of export orders, consistent with the recent experience of countries in the developed world, suggesting that world trade growth peaked in the first quarter of the year.”