Australia | Jun 16 2010
By Rudi Filapek-Vandyck
Westpac economists report 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 7.6% in April well above its long term trend of 3%.
The annualised growth rate of the Coincident Index was 3.9%, also above its long term trend of 3.2%.
Although the growth rate in the Index remained very strong in April, the month did see a moderation from 8.8% in March, a 12.5 year high, to 7.6% in April. Westpac economists point out this is the first slowing after ten consecutive months of sharp acceleration. They highlight the year to March saw the sharpest upturn in the Leading index since the rebound coming out of the early 80s recession.
While the Index continues to point to robust growth, the moderation in April is notable given that this largely pre-dates the sharp sell-off in global financial markets through May-June, note the economists.
In terms of the Index components, the most recent rise in the annualised growth rate from 5.4% in November to 7.6% in April has been mainly driven by international developments with commodity prices contributing 2.7ppts and US industrial production 1.1ppts. Corporate profits also contributed positively (+0.8ppts).
Other components were a drag on Index growth, including: dwelling approvals (–0.9ppts), overtime worked (–0.7ppts), productivity (–0.5ppts) and the All Ordinaries index (–0.5ppts). The real money supply added slightly to growth (+0.1ppts).
Westpac economists comment the sharp turnaround in commodity prices and fall in equities alone could see more slowing in the growth rate of the Leading Index in May-June.
The overall level of the Index was unchanged in the April month. US industrial production rose 0.8% and the real money supply increased slightly (+0.1%) but the All Ordinaries Index slipped 1.4% and dwelling approvals fell 14.8%, unwinding a sharp spike in March.
The level of the Coincident Index increased by 0.8 points (0.3%) in April. Retail trade was up by 0.3%; employment by 0.3% while the unemployment rate was unchanged.