Australia: Leading Index improves but still negative - Westpac

Bill Evans, analyst at Westpac, points out that the Australia’s six month annualised growth rate in the Westpac– Melbourne Institute Leading Index, rose from –0.47% in May to –0.02% in June.

Key Quotes

“These monthly movements can be choppy. Nevertheless the index growth rate remains below trend for a sixth successive month. Over the month, commodity prices; the sharemarket and dwelling approvals explained the improvement. On the other hand these positives were partly offset by deteriorating consumer confidence both overall and in the jobs market in particular.”

“With this big monthly turnaround, the Leading Index growth rate has lifted over the last six months from –0.36% in January to the current -0.02%.”

“The Reserve Bank Board next meets on August 6. Evidence from the July Board minutes indicates the Bank is likely to pause next month in its current easing cycle. However we do see further easing coming later in the year.”

“Westpac continues to expect a further 25bp rate cut, coinciding with a downgrade to the Bank’s growth and inflation forecasts in November.”