Australia Leading Index Turns Slightly Less Negative In September

(RTTNews) - Australia's leading index continued to signal below-trend growth for the coming three to nine months due to high inflation and interest rates and that lacklustre sub-trend growth momentum will carry well into next year, survey data from Westpac showed on Wednesday.

The six-month annualized growth rate in the Westpac-Melbourne Institute Leading Index rose slightly by over 0.1 points to -0.34 percent in September from -0.48 percent in August.

"September marks the fourteenth consecutive sub-zero read on the headline index growth rate, implying that lackluster sub-trend growth momentum will carry well into 2024," Matthew Hassan, senior economist at Westpac, said.

The overall slight improvement in September was driven by three main components, such as a widening yield spread, a stabilization in dwelling approvals, and a firming in US industrial production.

The Westpac Bank expects Australian GDP growth to ease to 1.2 percent in 2023 and hold around this weak pace in early 2024, with an annualized growth rate of 1.1 percent for the first half.

According to the survey, households are feeling the effects of higher interest rates and high inflation, while there are similar policy-related slowdowns overseas as well.

"However, the inflation situation is still clearly unsettling for the RBA, with the minutes of the October Board meeting showing a low tolerance for upside surprises," Hassan said.

"At this stage, the RBA looks likely to revise up its near-term forecasts for headline inflation, but not its medium term view, which is what would be needed to trigger a further rate rise."