Leading Index stabilises
- Leading Index growth rate steadies to –0.01%.
- Growth drags dissipating but momentum to remain soft in 2024.
- Improving signal mainly coming from equities, hours worked.
- Brief ‘tailwind’ from commodity prices has disappeared.
The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, improved slightly to –0.01% in April from –0.08% in March.
Westpac’s Matthew Hassan commented, “The Leading Index is again showing signs of some stabilisation in growth momentum. That is broadly consistent with the notion that the main negatives over the last two years – the combined drag on household incomes from sharply higher living costs, interest rate rises and a surging tax take – are starting to dissipate. The last six months has already seen a material moderation in inflation and the end to the RBA’s rapid series of interest rate rises. Coming months will see the Stage 3 tax cuts provide additional relief for household incomes, a prospect that is already supporting consumer sentiment a little.”
“Despite these shifts, Westpac expects the associated improvement in growth to be fairly muted, with GDP forecast to rise at a 1.9% annual pace over the second half of the year, up on the 1.3% pace over the first half of the year. This is still below trend for Australia which, with some moderation in population growth, is likely to be around 2.5%yr.”
The report is only available to subscribers.
The Westpac-Melbourne Institute Leading Index of Economic Activity for April 2024 was released at 11am (AEDT), Wednesday 29 May 2024. The next index will be released at 11am (AEDT), Wednesday 26 June 2024.
The Westpac–Melbourne Institute Leading Index of Economic Activity report examines movements in the leading indicator of economic activity in Australia. It is designed to anticipate economic growth in the next 3 to 9 months. Further information can be found here.