Emerging Markets (EM) showed a deterioration of their growth prospects during the last months, but with growing divergence. Our overall aggregate EM Manufacturing PMI decreased to 50.7 points in August (still in growth territory) from a 52.0 peak in December 2017. However, our sub-component on unbalanced economies (Brazil, Turkey,South Africa, Mexico) deteriorated more deeply, from a 53.0 peak in February to 49.6 in August. A recession was officially confirmed in South Africa last week and is looming in Turkey. This free fall reminds of 2014, when a tightening of Fed policy, a deceleration in China and policy mistakes nurtured recessions in key EM (Brazil, Russia). Such a bad cocktail is now again somewhat materializing. But, as in 2014, the growth disruption is stronger in key unbalanced EM economies and remains quite muted in other ones (EM Asia and EM Europe). The next things to monitor will be the potential for new policy shocks in vulnerable economies (monetary/fiscal policy in Argentina and Turkey, elections in October in Brazil).
