Emerging Market: India weaker, Russia & Brazil coming out of recession - NAB

Analysts at NAB explain that economic growth in major emerging market economies trended higher in the second quarter – back up to 5.5% yoy (compared with 5¼% between Q1 2016 and Q1 2017). That said, there have been markedly different conditions across the individual economies, they further add. 

Key Quotes

“Russia – the world’s sixth largest economy – has been a major contributor to faster growth. Russian growth rose to 2.5% yoy in Q2, up from 0.7% in Q1 2017 and 0.3% in Q4 2016. Improving industrial production and export trends have helped to bring the economy out of a deep recession. Similarly, growth has turned positive in Brazil – at 0.2% yoy – from -0.4% in Q1.”

“In contrast, India’s economic growth has slowed considerably in recent quarters – down to 5.7% yoy in Q2 (having fallen from a peak of 9.2% yoy in Q1 2016). Slowing industrial growth has been a major driver – with output rising by just 2.0% yoy in the first half of the year. While India’s government has attributed the slowdown to oneoff factors, weak inflation may indicate soft underlying demand.”

“China’s growth has been stable in the first half of the year at 6.9% yoy – ahead of October’s 19th National Congress, where significant leadership change could influence future economic reforms.”

“Industrial output in emerging economies has gradually recovered from relatively weak growth in the first quarter. According to the CPB measure, quarter-on-quarter output rose by 1.1%, stronger than the 0.8% increase in Q1, but still lagging the 1.4% increase in Q4 2016. In contrast, there appears to be a slowing trend in export volumes. Emerging market export volumes fell by 0.5% qoq in Q2, down from a 2.3% increase in Q1 and 2.8% in Q4 2016.”

“This slower trend appears evident in trade exposed East Asia and Latin America. While US dollar denominated exports have risen, much of this is connected to commodity price trends. Volumes are less robust – with a slowing trend evident in industrial output in Asia while Latin American output has only recently returned to modest growth.”