The revival of confidence among both consumers and corporations and the subsequent expansion in manufacturing have helped emerging-market economies to vault back to levels seen before the onset of the global financial crisis.

Manufacturing output and new orders growth in emerging market economies recorded the highest expansion since the second quarter of 2004, according to the latest HSBC Emerging Markets Index (EMI) from HSBC, a London-based banking and financial services organization.

In the vanguard The growth, combined with robust service-industries data, outperformed developed nations—reaffirming that emerging markets are the vanguard of global economic recovery. The EMI rose to 57.4 in the first quarter of 2010, which was up from 56.3 in the last quarter of 2009 and significantly higher than six quarters ago, when the index dipped to 43.4. Manufacturing output rose to 58.6 from 56.5 and services business activity climbed to 56.5 from 56.1 Meanwhile, the Purchasing Managers’ Index (PMI) data for China and India shows strong manufacturing growth in March, with Chinese output growth supported by a near-record rise in new orders, while input price inflation remained substantial. In India, business conditions continued to strengthen in March, but input cost inflation accelerated to the highest in the five-year series history.

At 57.0, the headline HSBC China Manufacturing PMI rose to its third–highest level in the survey history during March, pointing to a marked improvement of operating conditions in the Chinese manufacturing economy. For the first quarter of 2010 as a whole, overall growth of the sector was the most marked since the start of the series in April 2004.

The press statement from HSBC quotes Hongbin Qu, chief economist, China & co-head of Asian Economic Research at HSBC as saying, “Another substantially high headline manufacturing PMI reading, combined with strong growth of exports, points to an acceleration in industrial production and likely over 11 percent year-over-year GDP growth in [the first quarter]. With inflation pressures rapidly accumulating, this increases the risk of interest rate hikes in the coming months.” Indian outlook In India, meanwhile, the seasonally adjusted HSBC PMI Index slipped slightly last month from February’s twenty-month high, going from 58.5 in February to 57.8 in March. The fall largely reflected weaker expansions of both output and new orders.

Nevertheless, the PMI remained at a level consistent with a sharp improvement in overall operating conditions. The index has now registered above the neutral 50.0 mark in each of the past 12 months.

Commenting on the India Manufacturing PMI survey, Robert Prior-Wandesforde, senior Asian economist at HSBC said, “The most attention-grabbing aspect of the March PMI was the surge in input prices to a new series high, suggesting that companies are facing sizeable and mounting cost pressures. The survey also indicates that manufacturers are becoming more willing to pass on some of these increases in the form of higher output prices.”