More good news than bad

For all the talk of a global slowdown, the incoming data from the emerging world have been encouraging. Having bottomed out in Q2, GDP growth held steady at around 3.5% y/y at the start of Q3. EM manufacturing growth picked up, while exports stabilised. In the meantime, continued low inflation and the benign external environment is allowing central banks to continue cutting interest rates, which is helping to keep financial conditions loose. Indeed, while we expect EM currencies to come under pressure in the coming quarters, we don’t expect this to derail easing cycles in most places. In aggregate, we think that EM growth will edge higher in the coming quarters. That’s in contrast to the developed world, where we think that the year-on-year rate of growth is likely to weaken further.