I’ve nearly turned blue critiquing Westpac’s Leading Index, which has been wrong for longer than I can remember. Well, today it projects a forthcoming boom:
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 3.4% in January, above its long term trend of 2.7%. The annualised growth rate of the Coincident Index, which gives a pulse of current activity, was 2.2%, below its long term trend of 2.9%.
My advice is to ignore it (which is not to say growth won’t be OK in six months) . The coincident index has proved much more useful at forecasting growth for the past two years.
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.
