The Euro Crisis And Its Effect On Manufacturing In Emerging Markets

The Euro Crisis is beginning to have serious repercussions on more and more countries around the world. The declines in demand among the Euro Area countries as a result of the austerity programs they have adopted to deal with the crisis are leading to lower imports in the Euro Area and, as a result, lower demand in their trading partners' economies. The quarterly HSBC Emerging Market Index* for manufacturing, compiled by Markit dropped from 53.1 in the second quarter to 49.6 in the third quarter, below the 50 mark, which separates expansion from contraction. The first chart shows the steep drop in this index from the first of this year. Fourth quarter data will be available in the middle of this month.

Markit also publishes monthly indexes for selected countries that are more timely than the HSBC index. Data for Purchasing Managers' appraisal of manufacturing in December were released today. The PMIs for manufacturing in Brazil, China and Taiwan improved between November and December, but were still in the contraction area. India's PMI showed the strongest gain, increasing from 51.0 in November to 54.2 in December. Among the other emerging markets for which data are available, the Russian PMI for manufacturing fell from 52.6 in November to 51,6 in December, still, however in the expansion area while the PMI for Korea dropped to 46.4 in December from 47.1 in November, deeper into the contraction area.

The HSBC Emerging Market Index, compiled by Markit, includes the following countries: Brazil, China, the Czech Republic, Hong Kong, India, Israel, Mexico, Poland, Russia, Singapore, South Africa, Taiwan, Turkey, United Arab Emirates and Saudi Arabia.