Australia: Building approvals lift the Leading Index - Westpac

Bill Evans, analyst at Westpac, points out that the Australia’s six month annualised growth rate in the Westpac– Melbourne Institute Leading Index, rose from –0.54% in February to –0.09% in March.

Key Quotes

“Despite this recent lift the Index has still registered four consecutive months in which the growth rate has been negative. This continues to support the signal that growth through the first two to three quarters of 2019 is likely to be below trend.”

“Moreover the lift in the growth rate was entirely due (0.44ppts of the 0.45ppt lift) to one component – dwelling approvals – which printed a 19.1% lift reflecting a boost in the volatile high rise sector in NSW and Victoria. Note that approvals for the stable ‘private detached houses’ sector were actually down by 3.6%.”

“It is reasonable to expect a substantial reversal in the dwelling approvals series next month.”

“The signal from the Index has been consistent with the weak momentum in the second half of 2018 revealed in the print of the December quarter national accounts. In the second half of 2018 growth momentum slowed to an annualised pace of 1% from a 4% pace in the first half of the year.”

“Westpac expects growth in the Australian economy in 2019 to be around 2.2% – significantly below trend which is generally assessed as 2.75%.”