Despite deepening Russian weakness, output growth in emerging markets strengthened in February, but they continued to trail the developed world in the pace of growth, an HSBC survey showed.
February saw Russian business activity contract to the greatest extent since May 2009, the rate of decline having gathered momentum over the past five months as sanctions from the West and the oil price rout continued to hit the economy, according to analysts at Markit.
The HSBC emerging market output index, derived from the monthly PMI surveys, rose to a five-month high of 51.9 from 51.2 in January. However, the number stood well below its long-term average of 53.7.
"Despite seeing the fastest growth for five months, emerging markets collectively continued to significantly underperform against the developed world, sustaining the trend that has been evident over the past two years and therefore once again acting as a material drag on global economic growth," said Chris Williamson, chief economist at Markit.
As per the February data, the service sector growth picked up from January's eight-month low, but remained modest. Meanwhile, goods production increased at the fastest rate in six months.
China, India and Brazil show strong growth
Of the four largest emerging economies, only Russia showed a worsening scenario while India, China and Brazil saw output strengthening in February.
India recorded the strongest rate of expansion, followed by China where growth picked up to a five-month high. In Brazil, private sector business activity rose for the first time in five months. In contrast, Russian private sector output declined at the strongest rate since May 2009.
Manufacturing input prices fell further, mainly reflecting declines in Asian economies including China while output price inflation accelerated from January's marginal pace, but was weak overall.
The outlook for global emerging markets strengthened in February, HSBC said, citing the HSBC emerging markets future output index, which tracks firms' expectations for activity in 12 months' time, that has improved to an eight-month high.
China and Brazil registered brighter output expectations, while sentiment in Russia remained weak, HSBC said.
Growth rates in all three countries remained only modest, and far below typical rates of expansion seen prior to the global financial crisis, Williamson said.
"Although weak, the expansions in China, India and Brazil contrasted with the steepening downturn recorded in Russia, which is suffering the worst performance of all major economies so far this year."