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Note: The chart illustrates the so-called 3D’s rule which is a reliable rule of thumb to interpret the duration, depth, and diffusion – the 3D’s – of a downward movement in the LEI. Duration refers to how long-lasting a decline in the index is, and depth denotes how large the decline is. Duration and depth are measured by the rate of change of the index over the last six months. Diffusion is a measure of how widespread the decline is (i.e., the diffusion index of the LEI ranges from 0 to 100 and numbers below 50 indicate most of the components are weakening). The 3D’s rule provides signals of impending recessions 1) when the diffusion index falls below the threshold of 50 (denoted by the black dotted line in the chart), and simultaneously 2) when the decline in the index over the most recent six months falls below the threshold of -2.9 percent. The red dotted line is drawn at the threshold value (measured by the median, -2.9 percent) on the months when both criteria are met simultaneously. Thus, the red dots signal a recession.
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About the Leading Economic Index and the Coincident Economic Index:
The Leading Economic Index provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term. The Coincident Economic Index provides an indication of the current state of the economy. Additional details are below.
The Conference Board Leading Economic Index® (LEI) for Australia, decreased by 0.3 percent in September 2023 to 116.1 (2016=100), following a decline of 0.3 percent in August. The LEI fell by 1.8 percent from March to September 2023, an accelerated rate of decline from the contraction of 0.7 percent over the previous six-month period, between September 2022 and March 2023.
The Conference Board Coincident Economic Index® (CEI) for Australia increased by 0.3 percent in September 2023 to 114.8 (2016=100), after rising by 0.2 percent in August. The CEI grew by 1.0 percent in the six-month period from March to September 2023, following a 0.4 percent gain over the previous six-month period.
“The LEI for Australia fell for a consecutive month in September,” said Ian Hu, Economic Research Associate at The Conference Board. “Negative contributions from building approvals and stock prices offset positive contributions from the yield spread, money supply, rural goods exports, sale-to-inventories ratio, and gross operating surplus. The Australia LEI has been on a downtrend since December 2022, suggesting headwinds to economic growth in the near future. The Conference Board currently expects real GDP to expand in Australia by 1.9 percent year-over-year in 2023, but to moderate to 1.6 percent growth in 2024.”
The LEI for Australia fell in September |
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Negative contributions from stocks prices and building approvals fueled the decline of the Australian LEI |
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The growth trajectory of the Australia LEI, though improved in recent months, remains negative and signals a slowdown to growth in the near term
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About The Conference Board Leading Economic Index® (LEI) for Australia
The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by approximately 7 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle.
The seven components of The Conference Board Leading Economic Index® for Australia include: Yield Spread, Share Prices, M3 Money Supply, Building Approvals, Rural Goods Exports, Sales to Inventories Ratio, and Gross Operating Surplus.
To access data, please visit: https://data-central.conference-board.org/
About The Conference Board
The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.tcb.org
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