The economic cycle of Emerging Markets (EM) is currently deteriorating fast, indicated by our aggregate EM manufacturing PMI falling to 49.6 points in May, back below 50 (recession area) for the first time since August 2016. The May figure is -1.1 points below the March one. Hopes raised from Chinese stimulus measures are no longer supportive as even China’s official PMI fell back below 50 (49.4). As trade barriers have increased – U.S. tariffs on China, Mexico and India as well as retaliatory measures – the PMI of open EM is the weakest sub-index at 48.6, below 50 for the ninth straight month. But the difficulties are now broadening to other EM as well: The Fragile-4 markets (South Africa, Turkey, Brazil and Mexico) are also back below 50 (48.9) as a result of renewed exchange rate pressures. Moreover, the difference with past downturns is that oil price pressures did not abate yet (the benchmark Brent price has averaged USD65 per bbl year-to-date, well above the USD45 from August 2016) which means there is no particular relief for oil importing EM that posted a PMI sub-index of 49.8 in May (50.7 in August 2016).
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Weekly Export Risk Outlook 05 June 2019