An Australian leading economic index fell in February to contract at the fastest annual pace since 1982.
The index, a gauge of future economic growth, dropped 0.3 percent to 248.6 points from 249.4 in January, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 5.1 percent.
Today’s report adds to signs the economy will slide into its first recession since 1991 as a global slump cuts demand for exports from the world’s biggest shipper of coal and iron ore. Central bank Governor Glenn Stevens cut the benchmark interest rate last week to a 49-year low of 3 percent to spur demand.
“The rate of deterioration of the growth rate of the leading index is truly remarkable,” said Bill Evans, chief economist at Westpac in Sydney.
“For some months, the index has been signaling that the Australian economy will enter a recession,” he added. “The consistent run of negative reads for the growth rate is comparable with Australia’s previous recessions, which began in 1961, 1974, 1982 and 1990.”
The Australian dollar fell to 72 U.S. cents at 10:42 a.m. in Sydney from 72.22 cents just before the report was released. The two-year government bond yield was unchanged at 2.93 percent.
Westpac’s leading index tracks eight gauges of economic activity, such as company profits and productivity, to give an indication of how the economy will perform over the next three to nine months.
Westpac’s coincident index, a measure of the current state of the economy, fell 1.1 points in February to 240 points. The annualized growth rate of the coincident index was 0.7 percent, compared with its long-term trend of 3.4 percent.
Policy makers have cut borrowing costs by 4.25 percentage points since September.
“Given the importance of rate cuts in boosting confidence, we expect the bank will see the need to have ample capacity to be cutting rates through the second half of 2009,” Evans said.
April 15 (Bloomberg)