Two leading indexes for Australia are out this morning and both sing a gloomy tune for April. The Westpac/Melbourne Institute version rose slightly but remains quite depressed:
The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 0.2% in April 2012, well below its long term trend of 2.6%. The annualised growth rate of the Coincident Index, which gives a pulse of current activity, was 4.3%, well above its long term trend of 3.1%.
The Leading Index is pointing to a sharp slowdown over the second half of this year. Although the growth rate in the Index has improved from the very weak –1.5% read in February, at +0.2% it remains significantly below its trend rate of 2.6%. Readings over the last three months have been the weakest since 2009. Although growth remains well above the –6.0% low seen during the 2008-09 downturn, it is similar to the levels seen in 2000-01 when the Australian economy experienced a significant slowdown and came very close to recording a technical recession (September 2000 quarter saw a flat GDP result with a 0.5% contraction the following quarter).
Meanwhile, the Conference Board’s leading indicators fell significantly in the month, down 1.4%:
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Still not enough here to shift the RBA towards another cut.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
