The Australian economy is already slowing down and there are more storm clouds on the horizon.
Interest rate rises, sky-high inflation and gloomy global conditions have been weighing on the economy and a fresh set of forward-looking data suggests the situation will only get worse.
The Westpac-Melbourne Institute leading index, which draws on a range of domestic and international data points to paint a picture of future economic growth, returned its 10th negative result in a row in May.
The six-month annualised growth rate in the index, which signals the likely pace of economic activity relative to trend three to nine months into the future, fell to negative 1.09 per cent in May from negative 0.78 per cent in April.
Westpac Group chief economist Bill Evans said this was the lowest growth rate result since the pandemic and added weight to the bank's recently downgraded forecasts for economic growth.
The bank's economists now think growth will slow to 0.6 per cent in 2023, down from one per cent predicted earlier.
In 2024, growth is likely to pick up to one per cent, but this forecast has been revised down from 1.5 per cent.
"This weakness in the economy is centred around the consumer but also reflects a slowing global economy, a downturn in dwelling construction and a progressive weakening in the labour market," Mr Evans said.
Australia's economy is losing momentum, with quarterly growth pulling back to 0.2 per cent in the March quarter from 0.6 per cent in the three months to December.
The March quarter national accounts also revealed weakening household spending that was echoed in new Visa transaction data.
The firm's spending momentum index sunk 0.9 points to hit 98.8 in May, reversing an improvement over the month before.
All spending categories are now in contractionary territory - that is, below 100 per cent - aside from non-discretionary spending, or essentials.
At 101.5 index points, non-discretionary spending remains in expansive territory but it did fall 0.7 points over the month.
Discretionary spending contracted a further 0.2 points to 97.5.
These patterns are likely to continue as rising interest rates and red-hot inflation turn people away from restaurants and other non-essential spending in favour of cheaper alternatives, such as eating in.
While rising interest rates and high inflation are forcing consumers to cut back, higher earnings could help support consumer spending.
A dataset from the Australian Bureau of Statistics based on single touch payroll data shows wages and salaries paid by employers were up 9.3 per cent on April last year, or $7.7 billion.
But the measure of earnings fell 1.7 per cent from March, which ABS head of labour statistics Bjorn Jarvis said was likely because many sectors hand out bonuses in March.
Unlike the wage price index, which measures underlying movement in wages, the new earnings data set captures compositional changes in the labour market.
This includes switching jobs, taking on extra hours and bonuses and other additional payments.
