Westpac: Leading Index Points To A Sharp Slowdown

The muddy thrills and spills on a waterslide dug into a hillside in Waimauku in Auckland, New Zealand. Phil Walter/Getty Images

The run of disappointments for the economy continues with the release this morning of the Westpac Leading Index of Economic Activity.

Westpac reported:

The six month annualised deviation from trend growth rate of the Westpac Melbourne Institute Leading Index which indicates the likely pace of economic growth three to nine months into the future fell to –1.16% in April from +0.03% in March.

Westpac says this is a sharply weaker reading which points to a significant loss of momentum.

The May Leading Index reading is the weakest since late 2011 when the RBA embarked on its latest interest rate easing cycle. At that time, Europe’s sovereign debt crisis was in full swing and consumer sentiment had slumped heavily.

The latest decline has also been associated with a sharp fall in consumer sentiment and deteriorating external conditions including declining commodity prices and slowing growth in US industrial production.

There is some good news – or potential good news anyway – with Westpac highlighting the potential for a snap back in the leading index in particular consumer sentiment which has been a big driver of this fall while “other Index components may also have been affected by the timing of public holidays in April and adverse weather conditions in the US”.

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