Economic growth index dips for the 5th time
The leading index of economic activity, Westpac-Melbourne Institute, has once again experienced a decline. For the 5th time in a row now, the index plunged 0.1 per cent to 5.3 per cent in the month of August which is above its long-term trend of 3.1 per cent, well below the level seen in the month of March which was 10.3 per cent.
These present conditions are said to still remain positive due to the 4.8 per cent increase in the coincident index, a measure of current activity.
Chief economist Bill Evans of the Westpac Banking Corp Ltd stated that though the growth had increased, but it was still high. Evans stated that the economic growth stated by the data was in accordance with the Westpac’s forecasts, showing an average growth of 3.5 per cent for its 2010 forecast and 4 per cent for 2011.
He also said that the said increase was also in line with the current forecast for growth of the Reserve Bank in 2011 which was released through its Statement on Monetary Policy in August. However, contrary to RBA’s forecast that the growth is to remain above the trend at four per cent, Westpac expects the growth to slow down in 2012.
Based on a monthly basis, the All Ordinaries index and dwelling approvals have also experienced a dip of two and 4.7 per cent respectively. The real money supply, on the other hand, increased 0.5 percent and the US industrial production had a 0.2 per cent increase as well.
Reports also show that there was an increase in all the quarterly components, with overtime working up five per cent, the manufacturing materials prices swelling to 2.3 per cent, productivity gaining 0.7 per cent, and the real gross corporate surplus increasing eight per cent in the quarter. Except for the real money supply and manufacturing materials, all other components declined in March.
Evans stated that both business investment and household spending are not showing confidence which is largely due to the impact of the high Australian dollar to the inflation outlook. It was concluded that despite the indications that there will be a rise in rates, this will possibly not be seen until February.
