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Australia's Westpac-MI Leading Index Points To Sub-Trend Growth


A leading indicator of Australia's economic activity suggested that the economy would continue to see below-trend growth in the coming three to nine months, a survey by Westpac Institutional Bank and the Melbourne Institute revealed Wednesday.

The annualised growth rate of the Westpac-MI leading index, which indicates the likely pace of economic activity in the coming three to nine months, was 2.4 percent in February, weaker than the long term trend of 2.9 percent. The index reading, however, rose to 284.2 from 283.7 in January.

This is the sixth consecutive month that the growth rate in the leading index has been below trend, Westpac Chief Economist Bill Evans said. "The growth rate has picked up somewhat from the absolute low in November last year but the modest decline in February does not encourage too much optimism that growth is likely to exceed trend any time soon," he added.

Among the monthly components of the leading index, the All Ordinaries index rose 0.8 percent, and the real money supply was up 0.1 percent. Dwelling approvals contracted 7.8 percent while the US industrial production was unchanged.

Westpac forecasts the Australian economy to grow around 3 percent in 2012, while the current overall picture shows that "Australia had grown below trend for five consecutive years."

The annualised growth rate of the coincident index, which measures the pulse of current activity, was 2.3 percent, also below its long term trend of 2.9 percent. Evans noted that the growth rate of the coincident index also continues to track below trend, indicating patchy growth.

According to official data, the Australian economy expanded by a weaker-than-forecast 0.4 percent sequentially in the December quarter.

Minutes from the Reserve Bank of Australia's Board meeting on April 3 indicated that the case for a rate cut is strong. Nonetheless, it seems that the central bank is waiting for the release of March quarter inflation data for deciding on the next rate move.

by RTTNews Staff Writer

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