While the Index only gives us a glimpse of the likely momentum in the first few months of 2018 it is consistent with our view of the likely growth environment next year. Westpac is currently forecasting growth of 2.5% in 2018. Constraints on growth next year are likely to centre on a lack lustre consumer who struggles under the weight of weak wages growth; high energy prices and excessive leverage. Conditions in housing markets, particularly in the eastern states, are likely to soften while the residential construction boom will turn down.
MI Leading Index slipped in September
The six month annualised growth rate in the WestpacMelbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, slipped from –0.16% in August –0.21% in September. The growth rate remains negative pointing to below trend momentum and a sharp turnaround from strong positive, above trend reads at the start of the year.
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