"The outlook in Australia remains soft and uncertain. The knock-on impact of a slowdown in mining and resources investment is expected to affect overall activity levels. "
- Mark Adamson, chief executive of Fletcher Building Ltd
Australia's Conference Board Leading Economic Index (LEI), which includes several economic indicators to try to forecast the nation's economy direction, inched down in June. According to the report, the index fell 0.2% after the flat reading in the previous month amid political uncertainty and consumers' fears over job security. Building approvals, share prices, and the sales to inventories ratio made the largest negative contribution to the index, offsetting the increase in index levels seen for yield spreads, money supply, gross operating surplus and rural goods exports. For the first half of 2013, the index rose 0.8%, reversing the drop of 1.1% between June and December 2012. Meanwhile, the Coincident Economic Index, a measure of current economic activity, rose slightly in June, gaining 1.0% in the six-month period through June, compared to the 0.1% increase for the previous six months.
The RBA and the government are trying to bolster growth in the weakening economy through various fiscal and monetary policy stimulus. Two weeks ago the central bank cut its key-lending rate by 25 basis points to boost demand in the economy. Currently Australian interest rates are at the record low level in more than 50 years. The bank's rate cuts have led consumers to be slightly more positive about economy, but optimistic sentiment is yet to be felt by businesses.
© Dukascopy Bank SA