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Westpac-Melbourne Institute Leading Index Falls to Weakest Pace Since Late 2023

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The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index dropped to negative 0.36% in June from negative 0.25% in May, marking the sixth consecutive below-trend read and the weakest pace since late 2023 when quarterly GDP growth stalled flat, according to a Wednesday report by Westpac.

The bank said conflict-related fuel price spikes in March and April, combined with three Reserve Bank of Australia rate rises earlier this year, are now visibly dragging on economic activity through multiple channels.

The index has swung sharply since December, moving from 0.36% to negative 0.36%, with more than half of that reversal driven by a narrowing in the yield spread, the report added.

With the RBA board meeting on August 10 to 11, Westpac said the June quarter consumer price index release on July 29 will be the key data point ahead of the decision, and that it expects inflation to remain too elevated, pointing to another 25 basis point rate increase in August.

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