Westpac with the note.
The six-month annualised growth rate in the Westpac– Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to
nine months into the future, dropped to –0.08% in May from 0.19% in April.
The growth pulse has shown a significant deterioration since February, with May marking the first below-trend read since September last year. The detail suggests what was mainly an
external drag on momentum is becoming more domestically focussed. That said, some of these drags are likely to be temporary.
The Leading Index growth rate has deteriorated over the last six months, dropping from +0.35% in November to –0.08% currently. Six of the eight components have contributed to the turnaround.
Notably, the biggest shifts have come from domestic and sentiment-related indicators. Over three quarters of the 0.43ppt deterioration has come from a weakening in dwelling approvals (–0.21ppts) and slowing growth in hours worked (–0.13ppts). Softer reads from the Westpac–Melbourne
Institute Consumer Expectations Index and the Westpac– Melbourne Institute Consumer Unemployment Expectations Index have taken an additional 0.24ppts off the headline growth rate over the same period.
More per capita recession incoming.
