An indicator of Australian economic activity fell in November, pointing to slower momentum and signaling growth broadly in line with the trend in the coming year, according to a report by Westpac and Melbourne Institute published on Wednesday.
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, fell to about 0.2% in November from over 0.3% in October.
Australia's leading index shows momentum stalling, as recent share market losses and weaker consumer sentiment temper growth expectations, with activity forecast to rise only modestly to around the 2026 trend.
The leading index growth rate has picked up over the past six months, rising to roughly 0.2% in November from some 0.1% in May, as earlier uncertainty tied to US tariffs eased, said Ryan Wells, an economist at Westpac.
Five of the eight index components drove a modest gain since May, led by a turnaround in commodity prices and a notable contribution from dwelling approvals.
The consumer and unemployment expectations, after a sharp lift in November, have largely reverted to previous levels, contributing only modestly to six-month leading index growth, Wells said.
Economic growth has slowed, weighed down by a decline in hours worked, weaker industrial production, and diminishing support from the yield spread, even as longer-term bond yields rise amid hawkish monetary policy expectations.
The Reserve Bank's upcoming policy meeting in February comes amid rising inflation risks, prompting a more cautious stance on rate cuts and pushing potential easing into 2027, Wells added.
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