Leading index at 4-year low

An index of leading economic indicators for Australia declined to a four-year low in February, adding to signs that growth is slowing in the Asia-Pacific region's fifth-largest economy.

The leading index, a gauge of growth for the next six months, fell 0.2 per cent to 211.7, the lowest since January 2001, the Westpac Banking Corp and Melbourne Institute said in a report yesterday in Sydney.

The index tracks nine gauges of economic activity, such as share prices and telephone installations, to provide an indication of how the economy will perform.

A decline in the index suggested the Reserve Bank of Australia might refrain next month from increasing interest rates for a second time this year, economist Bill Evans said.

The central bank raised its overnight cash rate target a quarter percentage point to 5.5 per cent, a four-year high, on March 2.

"The March rate increase will be sufficient to achieve the Reserve Bank's inflation objective," Evans, global head of economics at Westpac, the nation's fourth-largest lender, said in Sydney.

"Growth will be lacklustre for most of 2005," he added.

The A$798 billion ($851 billion) economy grew 0.1 per cent in the fourth quarter from the previous three months, the slowest pace in four years, as companies' stockpiles declined and home building fell.

The leading index's decline in February was driven by a drop in the total number of overtime hours worked.

The annualised growth rate of the index was 1.2 per cent in January, less than its long-term trend of 3.5 per cent, suggesting economic growth will cool.

The Australian dollar and bonds were little changed after the report. The currency bought 77.27USc at 4.35pm in Sydney from 77.24c before the report was released. The yield on a 6.25 per cent government bond maturing April 2015 was unchanged at 5.35 per cent.

Among other signs that economic growth may cool, consumer confidence was at its second- lowest level in two years this month, a report by Westpac last week showed.

Also, business sentiment fell for a second month in March as companies said they cut staff and reduced new orders, a survey by National Australia Bank Ltd showed on April 12.

The central bank's board next meets on May 3 and announces its rate decision the following day. The March rate increase was the first in 15 months.

Eleven of 21 economists surveyed by Bloomberg News on April 8 said the bank would raise its overnight cash rate targetnext month.

The coincident index, a measure of the state of the economy, rose 0.4 per cent in February, Westpac said.

- BLOOMBERG