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Westpac Lead Indicator Continues To Signal Sub-Trend Growth

AUSTRALIA DATA

The Westpac leading index for July was flat on the month after rising 0.1%. This has left annualised 6-month growth at -0.6%, which leads activity relative to trend by 3 to 9 months, and suggests that growth will likely remain below trend in H1 2024. This measure has been negative since July 2022 and averaged -0.73% in the last year but appears to have stabilised. Westpac is forecasting GDP growth of 1% in 2023 improving slightly to 1.4% in 2024.

  • In terms of the index’ components, hours worked, yield spread and less pessimistic unemployment expectations all made positive contributions. Westpac notes that without the two labour market components, the index would be around -1%.
  • Commodity prices are now weighing on the leading indicator as well as dwelling approvals and equities.
  • Westpac believes that 4.1% is the cycle peak in the RBA cash rate.
Australia Westpac lead index vs real GDP %

Source: MNI - Market News/Refinitiv

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