Finance & Business World

Annual growth of an Australian index of leading economic indicators slowed in March for a fourth month, adding to evidence the economy will cool this year.

The annualized growth rate of the leading economic index slowed to 3.3 percent from 3.6 percent in February, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The leading index rose 0.2 percent to 264.5 from February.

Australia's $1 trillion economy, in its 17th year of expansion, is forecast by the central bank to slow after policy makers raised the benchmark interest rate to a 12-year high of 7.25 percent in March. The bank has also said it spent “considerable time'' discussing the case for an interest-rate increase this month to quell inflation.

“The leading index continues to point to an abrupt slowdown in economic activity,'' said Matthew Hassan, a senior economist at Westpac. “The index is now further below trend than at any time in almost five years,'' he said.

The Australian dollar fell to 95.64 U.S. cents at 10:33 a.m. in Sydney from 95.69 cents just before the report was released. The two-year government bond yield was unchanged at 6.89 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.

The central bank cut its forecast on May 9 for annual economic growth in the 12 months through June 2009 to 2.75 percent from the 3 percent it predicted three months earlier paydayloans.

`Opposing Forces'

The bank's policy makers, headed by Governor Glenn Stevens, “see powerful opposing forces affecting the Australian economy,'' according to minutes of the May 6 board meeting published last week.

“On the one hand, the slowdown in the developed economies, the ongoing strains in world financial markets and tight domestic financial conditions were working to slow demand and activity,'' the minutes said.

“Working in the other direction was the larger-than- expected stimulus to domestic incomes'' from China's demand for resources including coal and iron ore.

Westpac's coincident index, a measure of the current state of the economy, rose 0.2 percent in March. The annual growth rate of the coincident index was 3.4 percent.

“Business investment is coming under pressure,'' Westpac's Hassan said.

“The minerals boom will continue to run ahead as fast as capacity constraints will allow, but the prospect of slower demand domestically and the more difficult post-credit crunch funding environment will see new capital spending slow sharply in other sectors,'' he added.

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