Westpac sees economy surging

The Westpac Melbourne Institute Leading Index, which indicates the likely pace of economic activity 3-9 months into the future churned out a reading of 4.9% in May, which is way above its long-term trend of 3%.

The drivers would include strong corporate earnings, although Westpac acknowledges weak business confidence and an uptick in the unemployment rate, and thus expects another interest rate cut.

A reading of below zero indicates recession, so a 4.9% reading appears to be very bullish.

So, either the economy is set to surge over the next 3-9 months, or Westpac's leading index is spitting out garbage.

It'll be most interesting to see which.

Source: Westpac

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