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Manufacturing Decline Extends Lackluster Emerging Market Growth

Emerging market economies, which drove the rebound in global growth after the recession of 2009, remained “lackluster” in the fourth quarter as manufacturing fell the most in almost three years, HSBC Holdings Plc said.

HSBC’s EMI index, based on surveys in 16 emerging markets, was 52.2 in the three months through December, compared with 52 in the previous quarter, the bank said today in an e-mailed statement. A reading of 50 indicates no change from the previous quarter.

Factory output slid the most since the first quarter of 2009 as the European debt crisis dried up demand, the bank said. Regional policy makers, whose efforts to fight inflation early last year contributed to the slowdown seen in the latter half of the year, now have room to cut interest rates to stimulate growth, HSBC said.

Emerging markets “have retained some firepower to deal with the fallout,” Stephen King, the bank’s chief economist, said in the statement. “Unlike the developed world, there’s still plenty of room to cut interest rates and provide fiscal stimulus.”

China, the world’s second-biggest economy, relaxed lenders’ reserve requirements in December for the first time since 2008 as inflation slowed to a 15-month low and exports gained the least in two years. Data today will probably show the economy expanded 8.7 percent in the fourth quarter, the least since mid-2009, according to the median estimate in a Bloomberg survey.

The central bank of Brazil, the second-largest emerging economy, has also begun easing monetary policy, cutting its benchmark lending rate 50 basis points at each of its last three meetings. Economists expect the bank’s board to cut the rate another half point this week to 10.5 percent, according to the median estimate in a Bloomberg survey.

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