Gloss comes off the EM recovery

Events over the past month suggested that the Emerging Market (EM) recovery might not be as strong and stable as some seem to think. Economic data for the end of last year pointed to slightly softer growth. Our GDP Tracker suggests that total EM growth slipped to from 4.7% y/y in November to 4.4% y/y in December. This slowdown was mostly due to the weakness of consumer spending. Our Tracker suggests that retail sales growth slowed to a nine-month low in December. Inflation weakened across the EM world at the end of last year, but the policy response was mixed. Policymakers hiked rates in three economies, and cut them in four others. More recently, EM financial markets took a tumble in the middle of February following the correction in US equities. Markets have since recovered most of their losses, but remain weaker than a month ago.