Fed: Next year's slowdown could be softer than expected

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Fed: Next year's slowdown could be softer than expected

By Shane Wright

CANBERRA, Dec 18 AAP - Next year's economic slowdown may be softer than first thoughtwith new figures today pointing towards stronger than expected growth.

The Westpac/Melbourne Institute leading index of economic activity improved 2.7 percentagepoints on the back of the surge in housing approvals and an improvement on the Australianshare price index.

After recording minus 1.4 per cent in September, the index was 1.4 per cent in October.

Westpac's general manager economics Bill Evans said the turnaround in the index pointedtowards a softer than expected slowdown early next year.

"This reading of the index is pointing to a somewhat more moderate slowdown, but isnevertheless consistent with Australia having a soft spot in the first half of 2003,"

he said.

"That slowdown is now generally expected by most forecasters, with through the yeargrowth around 3.0 per cent for 2002/03, from the current 4.0 per cent, looking to be afairly safe bet."

Mr Evans said the clearest signal from the index was for the Reserve Bank.

"The current level of interest rates, which is lower than normal, is entirely appropriatefor that period," he said.

"Westpac would not expect the bank to start focusing on the need for higher rates untilwe are well through this period, probably near the end of 2003."

But there are still strong indicators of the economy slowing next year.

Other data released today backed the index, suggesting a a slowing in the motor vehicle market.

New motor vehicle sales fell 2.7 per cent in November, dragged down by a big drop insales of trucks, vans and utes.

The Australian Bureau of Statistics said passenger vehicle sales fell 0.7 per centin the month, while other vehicle sales fell 6.2 per cent.

But on seasonally adjusted figures, the ABS said new vehicle sales were still 4.7 percent higher than the same time last year.

There was also signs of a tightening in the jobs market, with vacancies for skilledworkers down for the fourth consecutive month.

The Department of Employment and Workplace Relations (DEWR) said its skilled vacanciesindex fell 0.1 per cent in December to 111.3 points.

But overall, skilled vacancies were still 7.7 per cent higher than the same time last year.

Vacancies for professionals dropped by 0.5 per cent and associate professionals 1.3per cent, pulled down by falls in demand for science professionals, accountants and buildingand engineering associates.

But vacancies for tradespeople increased, up 0.7 per cent in the month and 25 per centover the year.

AAP sw/cjh/sb

KEYWORD: ECONOMY NIGHTLEAD