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Lead Indicator Pointing To Slowing Growth Momentum

AUSTRALIA DATA

The Westpac lead indicator fell 0.36% in August on a 6-month annualised change basis after +0.49% in July. It was the first drop this year and is pointing to slowing growth momentum to below trend 3 to 6 months ahead. It was also the weakest since the lockdowns of Q3 2021.

  • Westpac expects its lead indicator to continue to weaken over the year after it peaked in March 2022. Currently, it is too soon for the RBA to worry about the softening of this indicator.
  • Growth has been very robust with Q2 posting +0.9% q/q and Q3 possibly stronger, but it is generally expected to slow going into the end of the year, as previous rate hikes start to have an impact. Westpac is forecasting only 1% GDP growth in 2023.
  • The moderation in the indicator was driven by higher interest rates and falling commodity prices but US industrial production (an indicator of global growth) and hours worked also contributed.
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