Rebound of the rich: Developed nations outgrow emerging nations in last few months

By: Floyd Norris

Call it the rebound of the rich.

During and after the Great Recession, developed economies tended to fare worse than emerging ones, and that was shown in the amount of business going to manufacturers and service companies in various countries around the globe. But in the last few months, that tide has turned. Companies in developed countries are more likely to be reporting growing business than are companies in emerging markets.

Monthly surveys look at trends in the most prominent developing countries - Brazil, Russia, India and China, the BRICS - and four major developed regions, the United States, Britain, the eurozone and Japan.

The surveys were taken by the Institute for Supply Management in the United States and by Markit in many other countries. They ask companies whether business is improving or getting worse, both overall and in a number of specific areas. The surveys focus on the question of whether new orders are increasing or decreasing.

For the first time in more than two years, the four developed regions surveyed reported rising orders for both manufacturing and service economies in August. There was still growth in some emerging markets, but Indian and Brazilian manufacturers reported falling orders in both July and August. The last period when both of those countries reported declines was March 2009, at the bottom of the worldwide credit crisis.

A simple way to compare the two groups is to average the four reported figures for developed countries and compare it to the average for the four emerging markets. The developed-area advantage is the highest it has been since the Great Recession began in the United States in December 2007.

It is impressive that of the eight eurozone countries where surveys are taken of manufacturing companies, only France registered a figure under the neutral number of 50 in August, and that figure, at 49.8, was the best French manufacturers had posted in more than two years. Even Greece posted a positive figure, the first time that had happened in four years. Germany's manufacturers, which reported order declines earlier this year, are again reporting increases.

Both the United States and Britain had figures above 60 for new manufacturing orders. That had not happened since the spring of 2010, when order books were still rebounding from the credit crisis. Similarly, the slip in new business has extended to many other emerging markets. While Chinese manufacturers reported a rise in new orders in August, the first such report in four months, the countries registering declines included Taiwan, South Korea, Indonesia and Vietnam. Their manufacturing exports run the gamut, from inexpensive clothes in Vietnam to cars and electronic products in Korea.
source:NEW YORK TIMES