Leading Index well below trend

Published on Thu, 21/07/2011, 01:29:19

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The retail industry is undoubtedly slowing down and this is being reflected in the Westpac–Melbourne Institute Leading Index.

The annualised growth rate of the Index, which indicates the likely pace of economic activity three to nine months into the future, was 1.6 per cent in May 2011, well below its long term trend of 3.0 per cent.

The annualised growth rate of the Coincident Index, which gives a pulse of current activity, was –0.1 per cent, well below its long term trend of 2.8 per cent.

Bill Evans, Westpac chief economist, said this is the lowest growth rate for the Index since September 2009 while the growth rate has now been below trend since February 2011.

“Westpac is expecting growth momentum in the Australian economy in the second half of 2011 at an annualised pace of around 2.5 per cent,” he said.

“Key aspects of that growth profile are expected to be weak growth in consumer spending as the cautious consumer seeks to further raise its savings rate; ongoing weakness in residential and non residential building; and some correction to the investment plans of those firms servicing the non mining sectors in response to the subdued outlook for sales.”


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