The latest activity data from EMs suggest that the economic recovery continued at the start of Q3. Consumer spending has continued to pick up across most regions, while both industrial production and export growth have remained relatively robust. Overall, our Tracker suggests that EM GDP growth hit a three-and-a-half year high of 4.8% y/y at the start of Q3. Alongside the robust activity figures, financial markets have also had a good month. Most currencies have appreciated against the US dollar, equities have rallied, and the spread of dollar-denominated EM government bonds over US treasuries has narrowed sharply. Looking ahead, while we think this is probably as good as it gets for EM growth, we don’t expect a collapse in growth or an abrupt sell-off in financial markets over the next eighteen months.
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