EM Coincident Indicator (EMCI)

February 2015
MARCH 10, 2015

The IIF EM coincident indicator (EMCI) declined further in February to 2.6%, confirming Kristina Morkunaite
SENIOR RESEARCH ANALYST
the weakness of the January release and suggesting that EM GDP growth in Q1 has
Global Macroeconomic Analysis
remained below its estimated Q3 pace of 4.3% q/q, saar, and also below the projected 1-202-857-3640
Q4 pace of 3.4% q/q, saar (Chart 1). kmorkunaite@iif.com

Among the 41 macroeconomic and financial variables that feed into the EMCI, the steep Felix Huefner
common downward trend persisted in both financial market variables and hard data. In CHIEF ECONOMIST
Global Macroeconomic Analysis
contrast, the common trend among sentiment indicators softened only slightly, painting 1-202-857-3651
a somewhat brighter picture Chart 2). fhuefner@iif.com

 Financial market data paint the clearest picture of weaker EM growth, as

commodity prices, equity prices, and currencies—some of which enter the
model with a lag—continued to slide (Chart 3). However, the recent stabilization
in oil and equity prices provides some cautious optimism going further. Please refer to our note
“A coincident indicator
 Trade data for January/February continued a broad-based decline in growth on for EM GDP growth”
a 3m/3m basis. In fact, only 1 out of 18 readings were positive for export and for more details on the
import growth, and only 5 showed improvement from last month, notably Brazil, construction of the
Argentina, and Korea (Charts 4 and 5).
EMCI.

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 IP data also weakened but cross-country readings were more mixed1, as the regular monthly up-
sustained improvement in Poland and Korea was offset by further declines in dates by email, you can
Russia and Brazil in January (Chart 6). set your preferences on
our website under:
 Business sentiment softened only marginally in February, as the broad-based https://www.iif.com/
improvement in EM Europe contrasted with the declines in India and Brazil email
(Charts 7 and 8). Moreover, the exports outlook dimmed in South Africa and
China. Among advanced economies, the German IFO contrasted with some
softening in the U.S. ISM.

 The weakening in the EMCI is evident across all EM regions, but most notably
so in LATAM (Charts 9 and 10).

Footnote 1. Due to the lagged release of IP during the Lunar Year in China, we assumed
a constant IP growth rate on a y/y basis for February.

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EM COINCIDENT INDICATOR (EMCI) FEBRUARY 2015 MARCH 10, 2015 page 2

Chart 1 Chart 2
EM GDP and Coincident Indicator EMCI EMCI by Component
percent change, q/q, saar; 3m/3m, saar percent change, 3m/3m, saar
12 EM GDP 12
10
EMCI
8 10
6 Financial Market
4 8
Business Surveys
2
6
0
-2 4
-4
2 Hard Data
-6
-8 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
Source: IIF. Source: IIF.

Chart 3 Chart 4
EM Financial Markets LATAM Merchandise Trade
index, 2010 Jan=100, monthly average percent change, 3m/3m, saar, current prices
180 60
50 Mexico Exports
160 40 Mexico Imports
Crude Oil, Brent
30
140 20
10
120 0
MSCI EM -10
100 -20
-30 Argentina Exports
80 -40
J.P. Morgan EM FX Index Argentina Imports Brazil Exports
Metals -50
60
Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 -60
Feb 13 Aug 13 Feb 14 Aug 14 Feb 15
Source: Datastream, Bloomberg. Source: Datastream, IIF.

Chart 5 Chart 6
EM Asia Exports EM Industrial Production
percent change, 3m/3m, saar, current prices percent change, 3m/3m, saar, constant prices
60 30
50 Indonesia Exports
Russia
China Imports Poland
40 Indonesia Imports 20
30
20 10
10
0 0
-10
-20 -10
Korea Brazil
-30 Korea Imports Korea Exports
-40 -20
Feb 13 Aug 13 Feb 14 Aug 14 Feb 15 2010 2011 2012 2013 2014 2015
Source: Datastream, IIF. Source: Datastream.

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EM COINCIDENT INDICATOR (EMCI) FEBRUARY 2015 MARCH 10, 2015 page 3

Chart 7 Chart 8
EM Manufacturing PMI
EM Manufacturing PMI and German IFO
diffusion index, 50=breakeven
diffusion index, 50=breakeven index
60 56 115
Singapore Electronics U.S. ISM
58 Orders 55 German IFO
54 110
56
India 53
54 52 Russia 105
51
52
50 100
50 49
Brazil 48 95
48 China
Turkey
47
46 46 90
Feb 13 Aug 13 Feb 14 Aug 14 Feb 15 Feb 13 Aug 13 Feb 14 Aug 14 Feb 15
Source: Markit, Datastream.
Source: Markit, Datastream.

Chart 9 Chart 10
EMCI By Regions EM Regions: Actual Real GDP
percent change, 3m/3m, saar percent change, q/q, saar
15 15

EM ASIA EM ASIA
10 10

5 5

0 0
LATAM LATAM
-5 EM EMEA
-5
EM EMEA
-10 -10

-15 -15
2007 2008 2009 2010 2011 2012 2013 2014 2015 08Q2 09Q3 10Q4 12Q1 13Q2 14Q3
Source: IIF. Source: IIF.

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