Leading index turns positive as economic momentum gathers pace

An economic survey is pointing to above-trend growth for the first time since early last year, according to Westpac.

People walk past a Westpac Bank sign in Sydney. (AFP PHOTO/WILLIAM WEST)

The Westpac-Melbourne Institute leading index is pointing to above-trend growth for the first time in 15 months in the latest sign interest rate cuts are starting to filter through the local economy.

The leading index, which highlights the likely pace of growth relative to trend, lifted from -0.01 per cent in July to +0.2 per cent in August.

“The positive index growth rate follows 15 consecutive months where growth has been below trend,” Westpac chief economist Bill Evans said.

“It is the first above trend result since early last year and the second strongest since December 2013.”

News of a lift in the leading index follows yesterday’s positive update on economy-wide spending from the Commonwealth Bank, which showed the fastest rate of acceleration in nine months.

The majority of the components used to develop the leading index improved, with commodity price gains, the sharemarket and improving labour market expectations among the biggest contributors.

The only offset came from a fall in monthly hours worked.

“The bulk of the improvement in index since the start of the year has come from improved international conditions (commodity prices, US industrial production, sharemarket and yield spread),” Mr Evans said.

“However it has been pleasing this month to see some improvement also coming locally from unemployment expectations and consumer confidence.”