Leading index still weak

Westpac with the note.

Despite the dip back into year-end, the Leading Index growth continues to show a clear improvement. December is the second consecutive month that the Index growth rate has been around or slightly above the zero ‘gain line’. That follows fifteen consecutive months of negative, below trend reads, mostly in the –0.5–1% range.

However, the broad picture still looks to be of, at best, a stabilisation rather than the beginning of a cyclical upturn. Much of the lift is coming from a recovery in commodity prices since mid-2023, a rally that may not last. Meanwhile momentum excluding this component still looks to be weak.