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Bill Evans, Research Analyst at Westpac, notes that the six month annualised growth rate in the Westpac-Melbourne Institute Leading Index of Australia, which indicates the likely pace of economic activity relative to trend three to nine months into the future, dropped from +0.05% in May to -0.33% in June.

Key Quotes

“This is the first below trend reading since September last year and the weakest index growth rate since July 2017.”

“The Leading Index growth rate has now slowed by just over 1ppt since the start of the year, swinging from a comfortably above trend pace to back below trend.”

“The comfortably above trend pace persisted through January to April; slowed in May; and has now moved below trend in June. We will need further confirmation of this below trend movement to be comfortable that the Index has now shifted to a below trend signal for the growth outlook for the remainder of 2018 and into 2019.”

“All components have contributed to this slowdown over the course of 2018 (from positive 0.68% in January to a negative 0.33% in June – a deterioration of 1.01ppts over the year).”