Australia Leading Index Signals Difficult Period For Economy




Australia's leading index signaled that the economy is entering an extremely difficult coronavirus period, data published by Westpac showed on Wednesday.


The Westpac- Melbourne Institute leading index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, fell to -0.96 percent in February from -0.49 percent in January.


The index growth has remained below trend for the fifteenth straight month.


"That signal is indicative that the Australian economy is entering this extremely difficult Coronavirus period with insipid momentum and is therefore more vulnerable to the shock," Westpac's Chief Economist, Bill Evans, said.


Data showed that the Leading Index growth rate deteriorated over the last six months from -0.84 percent in September to the current -0.96 percent, largely due to initial developments around the Coronavirus outbreak.


"The current weak signal from the Index is broadly based with seven of the eight index components contributing negatively to the Index growth rate. The sole positive contributor - a widening yield spread - is keying off expectations that RBA rate cuts will lower short terms interest rates cuts," Evans said.


On Thursday, the Reserve Bank of Australia is expected to announce another 25 basis point reduction in the cash rate and a quantitative easing programme that is likely to target the risk free yield curve, Evans added.

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