Westpac Leading index for November
I'm posting this a bit late, I was busy reading Ryan's awesome UK jobs data preview:UK labour market jobs report preview: Watch for wages going wonky
OK, back to the Aussie data:
- Comes in at -0.2% m/m vs. the prior of +0.1%
- The six month annualised deviation from trend growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, decreased from -0.13% in October to -0.21% in November.
Says WPAC:
- This result is a little disappointing
- In the two previous months we had seen some modest improvement
- The growth rate has now been below trend for the last five months
- That is indicating that growth in the Australian economy in the first half of 2016 will be below trend
- Treasury and the Reserve Bank are now assessing trend (or potential) growth at 2.75%
- Westpac's current forecast for 2016 entails an annual growth pace in the first half of 2016 of 2.75% (trend)
- The signal from the Leading Index indicates that our forecast may be somewhat optimistic.
On the Reserve Bank of Australia and the AUD:
- The Reserve Bank board meets next on February 2. Since the last rate cut in May this year Westpac has assessed that rates will be on hold throughout 2015 and 2016.
- We have seen no reason to change that view but do recognise that risks to the view are to the downside.
- The key dynamic that would be responsible for a need for lower rates would be the impact of falling terms of trade on incomes and spending.
- With further falls in the household savings rate; an expected sub USD 0.70 Australian dollar; and ongoing solid employment growth that prospect seems unlikely.
(bolding is mine)
