The Westpac-Melbourne Institute Leading index of Economic Activity was developed as a tool to identify turning points in the Australian economy. It provides a measurement of Australia’s likely rate of economic growth for the next three to nine months, relative to trend, and it is one of several important private sector estimates which provide markets with clues as to short term economic conditions. Its latest December reading rose for the fifth month in a row, from a revised November figure of 0.00% to 1.28%.
Westpac’s chief economist Bill Evans said the run of above-trend readings signalled a robust outlook for 2017. However, while Westpac was “comfortable” with its 3% 2017 forecasts, 2018 was another matter.
“Housing construction is likely to be contracting through 2018 while export growth will slow and the terms of trade are likely to be falling, slowing nominal income growth. Prospects for an offsetting boost from household spending and business investment are not encouraging.”
Bond yields changed little on the day. The yield of 3 year bond futures remained steady at 1.99% while 10 year yields rose 3bps to 2.76%.