Economic activity in the emerging markets declined in July for the first time in more than four years, data from a survey by Markit Economics and HSBC Bank showed Tuesday.

The seasonally adjusted Emerging Markets Index dropped to 49.4 in July from 50.6 in June, sliding below the no-change 50 mark - which separates growth from contraction - for the first time since April 2009. Manufacturing activity was weak during the month, while the service sector turned stagnant.

Contributing to the downturn, new business in global emerging markets declined for the first time in over four years, with China, India, and Brazil all posting lower receipts of new work.

The downturn was widespread, with all the four major economies recording negative growth. Chinese output fell for the second month running, mainly reflecting a contraction in goods production.

Meanwhile, employment in emerging market economies was broadly unchanged in July as job shedding at manufacturers offset a marginal growth in service sector workforce. Input prices rose at the fastest rate in four months, while prices charged for final goods and services were broadly flat.\

"The main risk for emerging markets at the moment is that the cyclical downturn in manufacturing and softer service sector activity will ultimately lead to a weaker job market," Frederic Neumann, Co-Head of Asian Economic Research at Markit, said.

"Deteriorating job prospects could weigh on household spending, thus undoing the lift expected from easing consumer inflation in most emerging markets."

RTTNews