Australia’s Westpac Leading Index fell -0.2% to a reference reading of 252.1 in January, the sixth consecutive month in negative territory. The annual pace of decline is -3.1%. According to Matthew Hassan, a senior economist at Westpac, “The leading index is now in deeply negative territory consistent with contracting economic activity.” The index has fallen to current levels only four times since record-keeping began 49 years ago and every instance preceded a significant recession. Australia’s GDP unexpectedly shrank -0.5% in the fourth quarter, the first negative print in 8 years, with a recession confirmed should the economy contract again in the three months to March. Minutes from the last policy meeting of the Reserve Bank of Australia said the central bank has “flexibility” to cut interest rates further, with overnight index swaps pricing in 75-100 basis points in easing over the next 12 months.
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