{"id":58484,"date":"2011-07-20T12:20:29","date_gmt":"2011-07-20T02:20:29","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/07\/20\/oz-leading-index-shocker\/"},"modified":"2011-07-20T12:20:29","modified_gmt":"2011-07-20T02:20:29","slug":"oz-leading-index-shocker","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/07\/20\/oz-leading-index-shocker\/","title":{"rendered":"Oz Leading Index Shocker"},"content":{"rendered":"

\n\t– Westpac-MI Leading Index slows further in May
\n\t– Index implies the 3-9 month growth outlook is weak
\n\t– Supports Westpac's view the next move on interest rates will be down<\/strong><\/p>\n

\n\t
\n\tBy Chris Shaw<\/p>\n

\n\tThe Westpac – Melbourne Institute Leading Index has continued to slow, recording growth of just 1.6% for May. The Index indicates the likely pace of economic activity three to nine months ahead. <\/p>\n

\n\tThe reading for May is is well below the long-term trend growth rate of 3.0% and represents the lowest growth rate for the Index since September of 2009. Growth has been at below trend rates since February of this year.<\/p>\n

\n\tIn the past six months the growth rate of the Leading Index has slowed from 4.5%, the decline driven by weaker US industrial production, lower dwelling approvals, weaker materials prices and corporate profits, a decline in productivity and a fall in real money supply.<\/p>\n

\n\tThe Coincident Index is also registering weak growth, this measure falling to a reading of 264.9 from 265.2 previously. The Coincident Index, which offers a pulse of current activity, has not delivered above trend growth since last September. This is due to weak retail sales, a recent slowing in employment and the flood related disruption to production experienced in the first quarter of this year.<\/p>\n

\n\tWestpac chief economist Bill Evans expects growth momentum for the Australian economy over the second half of 2011 of around 2.5% in annualised<\/span> terms. Such an outcome would be consistent with the below trend growth being signaled by the Leading Index.<\/p>\n

\n\tEvans suggests a key element of the growth profile in coming months will be continued weak growth in consumer spending as households look to lift savings rates. Ongoing weakness in residential and non-residential building is also expected.<\/p>\n

\n\tAccording to Evans, there is also likely to be some correction to investment plans for firms servicing the non-mining sectors of the economy, this in response to the current weak sales outlook. Strong ongoing mining investment should act as an offset.<\/p>\n

\n\tThe Reserve Bank of Australia (RBA<\/span>) meets on August 2 and Evans suggests recent board minutes indicate a moderating of the earlier view that rates need to be lifted urgently. This implies no change at the upcoming meeting, the wildcard being the possibility of a very high inflation number for the June quarter.<\/p>\n

\n\tWhile Westpac sees the next move on rates as down, Evans accepts the RBA<\/span> at present is some way from sharing this view. The RBA<\/span> has at least indicated growth forecasts would be revised lower, this reflecting ongoing consumer caution.<\/p>\n

\n\tEvans suggests the Leading Index reading is consistent with the expectation a weak economic growth environment will eventually require a reduction in interest rates.
\n\t <\/p>\n

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Westpac’s leading index is showing the lowest growth rate expectation since Sptember 2009.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[21,29],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/58484"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=58484"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/58484\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=58484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=58484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=58484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}