Leading Index on the incline

Jumps up in December.

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, jumped from +0.66% in November to +1.41% in December.

Westpac chief economist, Bill Evans (pictured), commented, “This is a very strong above trend reading and, following the solid results in October and November, points to solid above trend growth in the early part of 2018. However, in our view there are still key negatives around housing, household incomes and the consumer which are likely to challenge the sustainability of any upswing in 2018.

“The Index has recovered from the slow patch in June /August, and, for this month at least, is above the levels it enjoyed over the six months to May when the average growth rate reading was a solid +1.12%. In July, the growth rate printed –0.06% compared to December’s reading of +1.41%.”

The main component contributions to the lift over this period have been: commodity prices in AUD terms (+0.65ppts ); dwelling approvals (+0.20ppts); the Westpac-MI Consumer Sentiment expectations Index (+0.29ppts); the Westpac-MI Unemployment Expectations Index (+0.06ppts); a steeper yield curve (+0.06ppts); and the S&P/ASX200 Index (+0.12ppts); as well as US industrial production (+0.11ppts).

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