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Australia June Leading Economic Index Falls 1.8%, Westpac Says
Sydney, Aug. 21 (Bloomberg) -- A leading index of economic indicators for Australia, a gauge of growth over the next six to nine months, had its biggest fall in eight months in June as share prices fell, a survey showed.
Westpac Banking Corp./Melbourne Institute's monthly index of economic activity fell 1.8 percent in June. The leading indicator combines nine gauges of economic activity -- including overtime hours, building approvals, telephone installations, labor costs and share prices -- to give an indication of the likely pace of future economic growth.
The index may decline in coming months because of further falls in share prices, Westpac said. The benchmark Australian S&P/ASX 200 stock index has dropped 1.6 percent since the end of June. The decline in stocks and weaker-than-expected economic reports suggest the Reserve Bank of Australia may leave interest rates on hold next month, economists said.
The index ``is pointing to a substantial economic slowdown late in the year,'' said Bill Evans, general manager of economics at Westpac. ``We certainly expect there is little chance that the Reserve Bank will raises rates following the next board meeting in September.''
Twenty of 22 economists surveyed by Bloomberg News last week expect the central bank to leave its overnight cash target rate at 4.75 percent in September. Two forecast a quarter percentage point rate increase.
The Westpac leading index's annualized growth rate was 1.6 percent in June, below its long-term trend of 3 percent for the first time growth since February 2000. The annualized growth rate slowed from 4.6 percent in May.
That suggests Australia's economic growth rate is likely to slow in the second half of 2002 and into 2003, Westpac said. The economy grew 4.2 percent in the first quarter from a year earlier.
The coincident index, a measure of current economic growth, was unchanged in June.