The pace of growth is starting to lose some of its sparkle in India, Brazil, and South Africa, a trio of formerly powerhouse emerging markets that have until now been surprisingly immune to the global slowdown.
Brazil stunned markets on Friday by reporting that it expanded at only half the expected rate in the third quarter, while both India and South Africa reported sharp decelerations in growth.
The poor figures are an indication that many emerging markets, after outperforming western countries for years, may not be as resilient as many investors hoped.
Brazil's Bovespa stock index dropped sharply Friday. Growth in Latin America's largest economy slowed to a lethargic 0.6 per cent pace, compared to the consensus estimate of 1.2 per cent.
In India, the economy expanded at its slowest pace in three years in the third quarter. Gross domestic product was up 5.3 per cent from the year-ago period – a respectable figure if it were in western countries, but a sharp deceleration from figures that in recent years have frequently exceeded 9 per cent.
South Africa grew at an annual rate of 1.2 per cent in the third quarter. This is its weakest showing in three years, largely because of strike activity in the mining sector.
While each of the countries has specific domestic factors contributing to slower economic activity, Martin Schwerdtfeger, senior economist at TD Bank, said the overriding problem has been the sputtering pace of major economies. Growth this year in the U.S. has been anemic, and both the euro-zone and Japan have slipped back into recession.
"The combination of these factors has had a trickle-down effect on emerging markets," Mr. Schwerdtfeger said.
Trade flows between Canada and each of the three countries are small, so the deceleration won't directly impact on the domestic economy. But Mr. Schwerdtfeger warns that the sharp deceleration in growth implies sluggish demand for commodities, a concern because it will cause prices to decline and reduce revenue for companies in Canada's resource sector.
Another concern is that this decline becomes more protracted, contributing to lower overall global economic growth – which, should it occur, will impact Canada more strongly.
Handicapping the odds of a further growth slowdown are difficult.
China, the world's No. 2 economy and major emerging market, has reported slightly better-than-expected economic figures on industrial output in recent weeks. The U.S., while experiencing slow growth, remains in expansion territory and has so far avoided recession, another positive. Growth in Japan may revive because some of the recent weakness was due to territorial squabbles with China.
Given these factors, the risk of a global recession "is relatively limited," Mr. Schwerdtfeger said.