Australia: Leading Index well below trend - Westpac

Bill Evans, analyst at Westpac, points out that for the Australian economy’s six month annualised growth rate in the Westpac– Melbourne Institute Leading Index, declined from –0.13% in March to –0.47% in April.

Key Quotes

“The Index growth rate has been consistently negative over the last five months, a clear signal that economic growth through the three quarters of 2019 is likely to be below trend.”

“As noted last month, the improved signal in March was entirely due to a sharp lift in one component – dwelling approvals – which saw a spike in high rise activity drive a 19.1% surge. A 15.5% fall back in this component accounts for almost all – 0.32ppts out of 0.34ppts – of this month’s lapse in the Leading Index growth rate to more negative territory.”

“This consistent ‘below trend’ signal from the Index is in line with Westpac’s growth forecast for 2019 of 2.2%. We note that the Reserve Bank has recently lowered its growth forecast for 2019 from 3% to 2.6%. That adjustment is in the right direction and is official recognition that growth in 2019 will be below trend (generally accepted as around 2.75%).”