Westpac and the Melbourne Institute have this morning released their Leading Index of Economic Activity for December which fell back a little but shows growth still has a positive deviation from trend 3-9 months in the future of 1.06%.
That’s not too bad but Westpac says:
The Index is giving us a sound guide around the endogenous components of the growth outlook but cannot adequately capture the exogenous weakness associated with the downturn in mining investment and persistent below trend growth in government spending.
Which is a beautiful bit of economist-speak meaning the index doesn’t capture the weak bits of the economy, so it’s overstating things.
So do we believe it or not?
Westpac says that they revised the index in 2013 so that it would be “less prone to revision, timelier and quicker to detect turning points in the cycle.”
Which means we’ll give the leading index the benefit of the doubt for now regardless of Westpac’s reservations.