In what seems a reversal of fortunes, economic data from the US at the end of May shows revised GDP figures indicating activity fell at an annualised rate of 1 per cent in Q1 2014, the first outright contraction since 2011.
Meanwhile, China recorded 7.4 per cent growth in Q1 2014, year on year, in spite of a “complicated and severe economic environment at home and abroad”, according to the National Bureau of Statistics of China. It states the growth in the first quarter “performed within a proper range with structural adjustment, economic transformation and upgrading continuing to make progress”.
But it notes: “We should keep in mind that the external environment remains complicated and volatile and the national economy still faces downward pressure. We must create impetus by deepening reform, adjusting economic structure and improving people’s well-being in a bid to ensure a sustained and sound development of the national economy.”
This growth rate may seem surprisingly high given all the fears of a Chinese ‘hard’ landing, and this somewhat steady decline in growth rates rather than a rapid fall could see emerging markets gain more traction in the second half of the year.
Keith Wade, chief economist at Schroders, notes: “We continue to look for a rebound in the US and the world economy over the remainder of 2014.
“US recovery is also critical for the rest of the world, particularly the emerging markets that have continued to languish. Longer term there is considerable adjustment to be made by the developing economies to the post-financial crisis environment, but some countries such as India are making good progress towards leaving the ‘fragile five’ [Indonesia, South Africa, Brazil, Turkey and India],” he adds.
“Near-term indicators such as exports and the purchasing managers’ indices remain soft, but there are some signs that US import demand has begun to rebound and we will be watching carefully to see if this feeds through into stronger emerging market export growth in coming months.”
Meanwhile, Europe is also seeing a more positive growth outlook as the effects of austerity measures imposed or adopted by peripheral countries start to pay off.
Figures from Eurostat show seasonally adjusted GDP growth increased 0.3 per cent in the EU28 area, in the first quarter. Among the strong performers were Hungary and Poland with growth rates of 1.1 per cent, while Denmark recorded an increase of 0.9 per cent. Elsewhere, Germany and the UK were on level pegging at 0.8 per cent.
With the UK expected to post an impressive 2.9 per cent growth figure by the end of the year, according to the IMF, it seems the trend of developed markets over emerging markets may be continuing, but with some interesting contenders to watch out for in the coming months.
Nyree Stewart is features editor at Investment Adviser
