By Grant Shepherd
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months in the future has been announced. The November figure is at 7.6 per cent, well above its long-term average of three per cent.
Bill Evans, Westpac chief economist, commented on the impressive result.
"We continue to be surprised by the pace of recovery in the growth rate of the leading index. Over the past six months, growth has accelerated from –3.2 per cent in June to the current 7.6 per cent,” he said.
“As discussed in previous reports this rapid turnaround represents the fastest reversal in the growth rate of the leading index since the economy bounced out of recession in the mid 1970s,” he said.
Evans said that this growth is in line with expectations and will likely have an impact on consumer spending.
“This sharp recovery in the growth rate is consistent with Westpac’s view of the economic outlook. In through the year terms we expect the growth rate of domestic demand to bounce back from around 1¼ per cent in 2009 to 4¼ per cent in 2010,” he said.
“That will be supported by much stronger momentum in consumer spending (3¾ per cent growth in 2010 from 2¼ per cent growth in 2009); dwelling construction (17¼ per cent from zero per cent) and business investment (3½ per cent from –5½ per cent).”