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The estimated pace of future economic growth fell sharply in April, according to the Westpac-Melbourne Institute.
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'Sharp slowdown' in economic growth forecast
29 May 2014
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The six-month annualised deviation from trend growth rate of the institute’s Leading Index fell to negative 1.16 per cent in April, down from positive 0.03 per cent in March.
The Leading Index indicates the expected pace of economic growth three to nine months in the future.
Matthew Hassan, senior economist at Westpac, said this drastically weaker reading points to a significant loss of momentum in Australia’s economic growth.
The most disconcerting feature of the current slowdown in the Leading Index is its broad base, Mr Hassan said.
"All components have contributed to the swing from above- to below-trend growth. The index deliberately draws on a wide range of information sources covering different areas of the economy, in part to avoid ‘quirks’ in any one data source driving the headline result,” he said.
“While there may be some quirks in the latest readings, the fact that the slowdown is corroborated across all components is a strong indication that a genuine slowdown is underway.”
However, some factors contributing to the current slowdown may prove to be temporary, according to Mr Hassan.
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The sharp decline in consumer sentiment was largely a negative reaction to the May Budget, which may reverse or dissipate over time, he said.
“Other index components may also have been affected by the timing of public holidays in April and adverse weather conditions in the US,” Mr Hassan added.
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