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Matthew Hassan, Research Analyst at Westpac, notes that the six month annualised growth rate in the Westpac-Melbourne Institute Leading Index, dropped from +0.83% in April to +0.11% in May.

Key Quotes

“The Leading Index points to slowing growth over the second half of 2018. The May update is the weakest since September last year and while the index growth rate still indicates that momentum is running slightly above trend, there has been a clear shift lower in the first half of 2018.”

“The Leading Index growth rate has now slowed 1.31ppts since peaking at 1.42% in December. Domestic components account for most of the turnaround, with material shifts in every component: dwelling approvals (-37ppts); monthly hours worked (-28ppts); the Westpac Melbourne Institute CSI expectations index (-25ppts); and the Westpac-MI Unemployment Expectations Index (-21ppts).   On a combined basis, domestic components are now showing a below trend growth pulse for the first time since April last year.”