MNI Australia Leading Index Back To Signalling Above-Trend GDP

     SYDNEY (MNI) - From Westpac-Melbourne Institute's Leading Index for July

published Wednesday.

                                              July   June

---------------------------------------------------------

Leading Index                                97.89  97.88

6-Mo Annualized Deviation From Trend, % pts  +0.55  -0.06

     FACTORS: The leading index rose slightly in July but pointed to a strong

rebound in growth rate to 0.55% above trend from 0.06% below in June. However,

despite the rebound, the leading index growth rate has slowed materially since

the start of the year to +0.55% in July from +1.31% in February.

     The main reasons for a slowdown in the leading index growth rate over the

last six months are a rise in Westpac-MI unemployment expectations index,

reduced support from commodity prices and a narrowing yield spread. 

     TAKEAWAY: The signal from leading index is in line with the Reserve Bank of

Australia's expectation that growth will hold at an above-trend level in 2018

and 2019. But Westpac's expectation is that growth over the remainder of 2018

and into 2019 will hold slightly below trend particularly in the light of an

uncertain outlook for the consumer.

     COMMENTS: Westpac's chief economist Bill Evans extended his forecast

horizon on Tuesday and expects the RBA cash rate will remain on hold in 2020, in

addition to 2018 and 2019. 

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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