Growing divergences among EMs

Aggregate EM growth has continued to disappoint in recent months with signs of a renewed (albeit small) deceleration in the latest data. Perhaps more important though is the widening divergence in performance across the emerging world. The latest slowdown is due to weakness in major commodity producers. Elsewhere, the picture is better – growth has been more steady, inflation is under control, and central banks have scope to keep monetary policy accommodative. Perhaps most importantly, our China Activity Proxy continues to suggest that growth there has been stable since a sharp downturn at the start of last year, belying fears of an ongoing “hard landing”.