By Daniel Hunter

The HSBC Emerging Markets Index (EMI), a monthly indicator, rose from 53.0 in December to 53.9 in January. That was the highest figure since February 2012, and only slightly lower than the seven-year long-run average of 54.2.

Data broken down by broad sector showed that growth was broad-based across service providers and manufacturers, as the latter posted a third successive month of expansion and the fastest pace of growth since May 2011. Meanwhile the service sector registered the strongest growth in four months.

New business growth in emerging markets accelerated to a 22-month high in January. Manufacturing new orders rose at the fastest rate since April 2011, and across a broad base of economies. Only Egypt, South Korea, the Czech Republic and Poland posted declines in January.

Cost pressures in emerging markets were at their strongest in three months in January. The rate of input price inflation at service providers eased slightly, while manufacturing input cost inflation hit a 15-month high.

Employment growth was maintained in January, continuing the trend shown since August 2009. Manufacturers raised headcounts for the second month running, the first back-to-back increase in 17 months.

“After a difficult 2012, economic conditions in the emerging markets are continuing the improvement which began last August. Both manufacturing and service readings suggest economic activity is not just being supported by resilient domestic conditions, but also now by a pick up in new export orders. Export order PMIs were above the critical 50 level in 11 of the 16 economies surveyed, a level not seen since last April," Pablo Goldberg, Global Head of Emerging Markets Research, said.

“While the strongest readings continue to come from the services sector, which has proved to be quite resilient to a more challenging external backdrop, the good news is the pick up in manufacturing activity. Furthermore, the recovery in the manufacturing sector appears to have legs, as business expectations for a year out are also at their highest level for nine months. Central to this is the turnaround in the outlook for China, which is slowly pulling the rest of Asia with it. Countries closer to the ailing eurozone are still struggling, however.

“The recovery is not without risks. January PMIs show a pick-up in input prices across the board, which need to be carefully monitored, given the recent rally in oil prices. Yet this pressure does not appear to be being passed onto the consumer. Output prices remain contained which should allow emerging market central banks to retain a loose stance for now."

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