Australia: Leading Index drops below trend - Westpac

Bill Evans, Research Analyst at Westpac, notes that the six month annualised growth rate in the Westpac–Melbourne Institute Leading Index of Australia, which indicates the likely pace of economic activity relative to trend three to nine months into the future, dropped from +0.05% in May to –0.33% in June.

Key Quotes

“This is the first below trend reading since September last year and the weakest index growth rate since July 2017.”

“The Leading Index growth rate has now slowed by just over 1ppt since the start of the year, swinging from a comfortably above trend pace to back below trend.”

“The comfortably above trend pace persisted through January to April; slowed in May; and has now moved below trend in June. We will need further confirmation of this below trend movement to be comfortable that the Index has now shifted to a below trend signal for the growth outlook for the remainder of 2018 and into 2019.”

“All components have contributed to this slowdown over the course of 2018 (from positive 0.68% in January to a negative 0.33% in June – a deterioration of 1.01ppts over the year).”