Australia | Dec 17 2008
By Rudi Filapek-Vandyck
The annualised growth rate of the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 0.6% in October, well below its long term trend of 3.8%, economists at Westpac report. The annualised growth rate of the Coincident Index was 1.6%, also below its long term trend of 3.5%.
This means, the economists explain, that following the sharp slowdown in the growth rate of the Leading Index in September, October has brought further cooling in growth, although at slowing pace. In September the growth rate slowed from 4% to just 1.1%. This has now been followed by a further slowdown in the growth rate to just 0.6%.
Westpac economists now believe it is likely that economic growth for Australia in 2009 will, at best, show little improvement on the anaemic 1.6% they expect through 2008.
The level of the Coincident Index rose slightly by 0.4 points. However, its growth rate, at 1.6% remains well below trend (3.5%) and indicates that early momentum in the December quarter is weak.
The main explanation for the consistently weak growth rate of the Coincident Index has been weak retail sales, say the economists. They believe the government’s $8.4bn one off payment to eligible households now being distributed will likely provide a noticeable boost to retail spending in the December and March quarters.