Study: The Gap Between Developed and Emerging Economies Widens


The economies of the developed world showed signs of improvement while developing-world economies lagged behind, according to a recently released report by Markit.

The aggregated Purchasing Managers Index, or PMI, for the world rose from 54 in July to 55.2 in August. The global statistic is often seen as a slightly leading indicator for gross domestic product, which would be on track to improve to a 3 percent increase in the third quarter this year compared to a 1.6 percent increase in the second quarter.

However, the report expressed concerns over a growing gap between emerging and developed countries. Not only was the gap reflected in the PMI numbers, with most of the world’s gains coming from developed countries, but it also manifested itself in the PMI output/activity index and in equity markets, where the gap between developed and emerging countries has grown since May.

In equity markets, emerging markets led developed countries for a period of time between mid-2009 and early 2013. This is likely a reflection of fears that the tapering of the U.S. Federal Reserve’s bond-buying programs could negatively affect emerging economies across the world.

Signs of strength for the economy of the United States were abundant. Growth in the second quarter was 0.6 percent, up from 0.3 percent in the first quarter, and that figure is expected to rise in the third quarter, as well. The PMI for all sectors came in at 60.6, its highest level since February 2011. The unemployment rate, which came in at 7.3 percent, was also the lowest value seen for quite some time.

Japan’s economy showed signs of a definite rebound, with growth in the second quarter improved from projections of 0.6 percent to 0.9 percent. This is good news for proponents of so-called “Abenomics,” the economic policies of Japan’s prime minster. Another boost to the Japanese economy came with the announcement that the country will be hosting the summer Olympic Games in 2020. The infrastructural plans in the lead-up to the games may very well become the “fourth arrow” of the prime minister’s policies.

PMI numbers for the eurozone showed a second straight rise in the output index, with positive results for the manufacturing and service sectors leading the way. While many have been cautious to use the word “recovery” in respect to the eurozone, if PMI is truly a leading indicator for GDP, economic improvement for the eurozone may very well be on the way.

One of the most striking performances in the developed world has been in the United Kingdom, where PMI values posted a record high in August for the second straight month. Some have claimed that this could be indicative of third-quarter growth that could breach the 1 percent threshold. Meanwhile, unemployment in the U.K. fell during the month, with recruitment offices reporting a marked increase in activity.

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