New reports predict domestic slowdown will continue

The Australian economy is expected to continue its domestic slowdown, according to two reports released today.

The likely pace of economic activity in the next three to nine months is expected to slow from its long-term trend, according to the Westpac–Melbourne Institute Leading Index. The index was at 2.6% in January this year – below its long-term trend of 3.0%.

The annualised growth rate of the Coincident Index, which gives a pulse of current activity, was 2.5%  – also below its long-term trend of 3.0%.

Over the last six months the index growth rate has stalled from an above-trend 4.4% in August to just 2.6% in January.

“The main components driving the slowdown have been overtime worked, manufacturing prices, dwelling approvals and company profits,” says Matthew Hassan, senior economist at Westpac.

Hanson doubted the figures would be enough to draw an interest rate easing from the RBA at its April meeting.

“We suspect the board will require more evidence of sub-trend growth and a weakening labour market before it is comfortable delivering another (interest) rate cut,” Hassan says.

‘‘Excluding the 2008/09 downturn, that marks the weakest read since the post-GST soft patch in 2000-01.”

An Australian Bureau of Statistics report noted a reduction in imported products in February compared to December 2011 and January 2012.

Merchandise imports fell 5% in February, seasonally adjusted, to $19.796 billion.

The figures showed a decline in imports in all product categories except fuels, lubricants, tobacco and beverages.

Total merchandise imports to Australia in December were valued at $20,073,000. Imports fell to $19,149,000 in January and $17,909,000 in February.