A report by the Melbourne Institute has indicated that economic trends for May pointed to less optimistic economic outlook for the Australian economy as creeping wariness on the effects of the European debt crisis started shrouding economic growth expectations.

The report is quick to add though that the country's economy remains generally robust despite the drop in economic confidence in May as compared to the bulletin released by the institute in April.

Melbourne Institute researcher Michael Chua gave assurance that the local economy is actually on its way to further strengthening though the nagging worries about the eurozone situation has been a grave source of concerns as the world economy inches its way to recovery.

He added that the institute expects further economic growth but the pace of recovery is still in question in light of the worrying developments, a he stressed that "recent financial market developments emerging from Europe also highlighted the fragility of the global recovery and could suggest that the global financial crisis may not be over just yet."

Dr Chua revealed that the institute has identified key economic indicators which suggested that the local economy might experience a slowdown later this year.

He said that the 7.0 percent decline in the Westpac-Melbourne Institute consumer sentiment index in May is a sign that a cautious attitude in consumer spending could be expected in the coming months.

Dr Chua added that with an 8.5 percent hike in the Westpac-Melbourne Institute unemployment expectations index in the same month, a growing perception that work slots may not be that easy to secure could further hamper targeted recovery and growths this year.

Notwithstanding the cautious outlook by the institute, official data showed that the country's economy has improved by 0.9 percent in the December quarter en route to an annual rate of 2.7 percent growth.

Also, the Melbourne Institute is predicting that Australia's gross domestic product (GDP) would grow by 0.8 percent in the March quarter and 0.7 percent by 2010's second quarter, with up to 0.6 percent quarterly advances for the rest of the year.