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Westpac Banking : MI Leading Index December (PDF 74KB)

01/26/2022 | 07:09pm EDT


27 January 2022

Leading Index currently "marking time" amid uncertainty

The six-month annualised growth rate in the Westpac- Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose from -0.19% in November to -0.15% in December.

The Index growth rate remains in slight negative territory in December consistent with the high degree of uncertainty around the near-term outlook as the strong reopening forces we saw in the December quarter are impacted by the current spectacular spread of Omicron.

In that regard we have lifted our growth forecast for the December quarter 2021 from 2.2% to 2.6%, partly reflecting the compound boost of over 12% to retail sales in October/ November.

In contrast, our own high frequency credit and debit card data for the first few weeks of January is pointing to a marked fall in consumer spending over that period which can be attributed to the Omicron shock.

With confidence related spill overs to business investment and inventories in January we have marked down our forecast growth rate in the March quarter from a robust 2.3% to zero.

Later quarters have been boosted to reflect the delayed catch up although, overall, forecast growth in 2022 has been lowered from 6.4% to 5.5%.

We will be cross checking this view with developments in the Leading Index as we move through 2022.

The Index growth rate has fallen 1.4ppts over the second half of the year from +1.4% in July to -0.15% at year end. Four components account for the slowdown: commodity prices (in AUD terms, -0.6ppts); aggregate hours worked (-0.5ppts) dwelling approvals (-0.2ppts); and the S&P/ASX200 (-0.2ppts). The four remaining components - the yield spread, the Westpac- Melbourne Institute Unemployment Expectations Index, the Westpac-Melbourne Institute Consumer Expectations Index and US industrial production - have had a neutral impact on a combined basis.

Westpac-MI Leading Index

% ann

% ann















*6mth annualised, deviation



from long run trend


Sources: Westpac-Melbourne Institute










Westpac expects that the Board will decide to cease its purchases of government bonds, bringing an end to the $350 billion program.

That will be justified on the recent evidence of success in achieving the Bank's inflation and employment goals while it will also be guided by the moves by the FOMC to sharply scale back its own programs.

The Bank will also release a revised set of economic forecasts which we expect will be a first step towards making the case for an interest rate increase which Westpac expects in August this year.

Bill Evans, Chief Economist, ph (61-2) 8254 8531

The Reserve Bank Board next meets on February 1.

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.




© Copyright 2022 Westpac Banking Corporation

Things you should know.

Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 ('Westpac').


This material contains general commentary only and is not intended to constitute or be relied upon as personal financial advice. To the extent that this material contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on it, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs, and, the disclosure documents (including any product disclosure statement) of any financial product you may consider. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This material may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure the information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of the information, or otherwise endorses it in any way. Except where contrary to law, Westpac and its related entities intend by this notice to exclude liability for the information. The information is subject to change without notice and none of Westpac or its related entities is under any obligation to update the information or correct any inaccuracy which may become apparent at a later date. The information contained in this material does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter

a legally binding contract. Past performance is not a reliable indicator of future performance. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

Country disclosures

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This communication is being made only to and is directed at (a) persons who have professional experience in matters relating to investments who fall within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this communication or any of its contents. The investments to which this communication relates are only available to and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such investments will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely upon this communication or any of its contents. In the same way, the information contained in this communication is intended for "eligible counterparties" and "professional clients" as defined by the rules of the Financial Conduct Authority and is not intended for "retail clients". With this in mind, Westpac expressly prohibits you from passing on the information in this communication to any third party. In particular this communication and, in each case, any copies thereof may not be taken, transmitted or distributed, directly or indirectly into any restricted jurisdiction. This communication is made in compliance with the Market Abuse Regulation (Regulation(EU) 596/2014).

Disclaimer continued overleaf




Disclaimer continued

Investment Recommendations Disclosure

The material may contain investment recommendations, including information recommending an investment strategy. Reasonable steps have been taken to ensure that the material is presented in a clear, accurate and objective manner. Investment Recommendations for Financial Instruments covered by MAR are made in compliance with Article 20 MAR. Westpac does not apply MAR Investment Recommendation requirements to Spot Foreign Exchange which is out of scope for MAR.

Unless otherwise indicated, there are no planned updates to this Investment Recommendation at the time of publication. Westpac has no obligation to update, modify or amend this Investment Recommendation or to notify the recipients of this Investment Recommendation should any information, including opinion, forecast or estimate set out in this Investment Recommendation change or subsequently become inaccurate.

Westpac will from time to time dispose of and acquire financial instruments of companies covered in this Investment Recommendation as principal and act as a market maker or liquidity provider in such financial instruments.

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Individuals who produce investment recommendations are not permitted to undertake any transactions in any financial instruments or derivatives in relation to the issuers covered by the investment recommendations they produce.

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The following arrangements have been adopted for the avoidance and prevention of conflicts in interests associated with the provision of investment recommendations.

  1. Chinese Wall/Cell arrangements;
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The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.



© Copyright 2021 Westpac Banking Corporation

Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 ('Westpac').


Westpac Banking Corporation published this content on 27 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 January 2022 00:08:07 UTC.

© Publicnow 2022
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