Market Outlook – Week of May 12–16, 2025
Key Focus: Australian Labour Data, U.S. Inflation & Retail Sales
Monday begins quietly in terms of scheduled economic releases. Activity picks up on Tuesday with the BoJ releasing its Summary of Opinions in Japan, while in the U.K., labour market data will be in focus with the claimant count change, average earnings index (3m/y), and unemployment rate. In the U.S., the spotlight will be on the CPI inflation data.
On Wednesday, Australia will publish its Wage Price Index (q/q), followed by employment change and the unemployment rate on Thursday. That same day, the U.K. will release both its monthly and preliminary quarterly GDP figures. In the U.S., we’ll see the PPI (m/m), retail sales (m/m), and jobless claims. In addition, Fed Chair Jerome Powell is set to speak at the Thomas Laubach Research Conference in Washington, D.C.
To wrap up the week, Friday brings the preliminary University of Michigan Consumer Sentiment Index and inflation expectations.
U.S. Focus: CPI and Retail Sales
Forecasts for April's core CPI suggest a 0.3% increase (up from 0.1% prior), while headline CPI is also expected to rise by 0.3% (after a previous decline of -0.1%). Year-over-year CPI is anticipated to remain unchanged at 2.4%.
Last month’s dip was primarily due to weakness in volatile categories like energy, travel, and lodging—areas impacted by uncertainty, fiscal tightening, and looming tariff changes. While these pressures continued into April, seasonal effects and early tariff impacts, especially in auto pricing, may start pushing core goods inflation higher. Still, analysts caution that the full effect of these policies won’t be visible just yet.
Australia: Labour Market in the Spotlight
Expectations for the Wage Price Index (q/q) stand at 0.8% (vs. 0.7% prior). Last quarter, wage growth came in below expectations, with annual wage inflation falling from 3.6% to 3.2%. Analysts don't expect a strong rebound this time either, though the annual rate is likely to hold steady.
For employment change, the forecast is 20.9K jobs added (down from 32.2K prior), while the unemployment rate is expected to remain at 4.1%.
Though March saw a solid employment gain, overall job growth was flat in Q1 2025. Westpac analysts attribute this partly to weaker population growth, which also pushed down the labour force participation rate—from a January peak of 67.2% to a more stable 66.7–66.8% range.
This downtrend appears to be cyclical, reflecting less pressure on households to seek additional income as inflation cools and cost-of-living concerns ease.
The RBA is expected to continue monitoring these labour trends closely. With inflation softening, markets anticipate a gradual pace of rate cuts—likely one 25 bps cut per quarter, with the next moves expected in August and November.
U.S. Retail Sales: One-Off Spike or Lasting Strength?
Forecasts for core retail sales (m/m) suggest a 0.3% increase (vs. 0.5% prior), while overall retail sales are expected to be flat (0.0%) after a sharp 1.4% jump previously.
The March surge was driven largely by households bringing forward major purchases—especially vehicles—amid tariff concerns. Vehicle sales rose 5.3%. However, the strength extended beyond autos: restaurants (+1.8%) and the control group (+0.4%) also posted solid gains, indicating robust consumer activity.
Looking ahead, the key question is whether March was a one-off, front-loaded response to tariff fears. If so, a slowdown could follow. Yet early data shows that auto sales remained strong in April, possibly postponing any pullback. Analysts now expect a modest overall gain in April retail sales, with non-auto categories rising steadily by about 0.3%.
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