In a pivotal week for economic indicators in Australia, key data releases regarding inflation and the labor market are set to be scrutinized by analysts and policymakers. On Wednesday, the Consumer Price Index (CPI) for May will be released, followed by critical employment data on Thursday.
The Commonwealth Bank of Australia (CBA) economists anticipate a slight easing in headline inflation, predicting it will decrease to 4.1%, primarily driven by reduced fuel prices. However, underlying inflation—an important metric for the Reserve Bank of Australia (RBA)—is expected to rise to 3.5%. The CBA highlights ongoing uncertainty regarding how much of the increased operational costs businesses will pass on to consumers. They noted, “While we expect some increase in pass-through during May, the available data suggest that the more severe inflation scenarios considered in the immediate aftermath of the Middle East conflict have so far not materialised.”
On the labor market front, after a disappointing report in April that saw a 19,000 job decline, forecasts indicate a bounce-back. Predictions for job growth range from 15,000 to 45,000, with an expected average of around 30,000 jobs added in May. Westpac has also projected a decrease in the unemployment rate to 4.4%, attributing this to a slight uptick in the participation rate.
Globally, the focus will shift to the United States, where the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure (PCE) index, is projected to show a robust increase. Analysts are estimating a monthly rise of 0.4% in headline terms and 0.3% for the core measure, which may impact discussions of future interest rate adjustments. Additionally, the final estimate of Q1 GDP for the U.S. will be released on Thursday, alongside a series of Purchasing Manager Index (PMI) readings from major economies, aimed at providing insights into global economic health.
With a blend of local and international data set to unfold, market participants are bracing for potential volatility and insights that could shape economic policy in the upcoming months.
