Reserve Bank’s business cycle gauge is more gloomy news for growth
BY STAFF WRITER: 26 July 2016, 09:24
The Reserve Bank’s composite leading business cycle indicator, a strong gauge of where economic growth is headed, dipped to 90.8 in May from 90.9 in April.
The Bank said on Tuesday that the main negative factors in the latest reading were from a fall in the average number of hours worked in the manufacturing sector, as measured by the Bureau for Economic Research (BER) and a more negative reading in the BER’s business confidence index.
Positive contributions came from faster year-on-year growth in job advertisements and wider interest rate spreads, the Bank said.
Aside from an uptick in March, the indicator has fallen every month this year, compared with the previous month. Year on year, every monthly reading this year has been at least four points lower than the same month a year earlier.
This all supports the gloomy outlook for economic growth this year.
The Bank’s latest forecast, which it announced when it kept interest rates unchanged at 7% last week, is for zero growth for 2016, with that picking up to 1.1% in 2017 and 1,5% in 2018. The Bank lowered its outlook for all three years.
The Bank said on Tuesday that the composite coincident business cycle indicator increased by 0.1% in April compared with March, and the composite lagging indicator was 0.5% higher in April than in March.
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