Bill Evans, Analyst at Westpac offers his afterthoughts on the Australian Westpac-Melbourne Institute Leading Index.

Key quotes

“The Leading Index’s growth rate surged in February and March as the benefits to the economy from the reopening in the eastern states gained maximum momentum. Since that time the growth rate in the Leading Index has been sliding.”

“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, slowed to 0.40% in June from 0.56% in May.”.

“The June Index is capturing the very early impact of central bank tightening cycles. Most notable for the Australian economy has been the Reserve Bank of Australia, where the first move was initiated in early May.” 

“ As the Reserve Bank extends and accelerates the pace of its tightening cycle, we can expect the growth rate in the Index to continue to ease.” 

 “The reading for June indicates above trend growth in the near term. We expect that as we move further into the three-to-nine-month ‘window’ growth prospects are going to falter.”