The upcoming week promises a busy economic calendar, with a focus on labor market data and inflation figures across several key regions. Here's a breakdown of the key events and what they might mean for markets.
U.K. Labor Market Softening
The U.K. labor market is showing signs of softening, with a consensus for the claimant count change of 25.9K, down from the prior 26.8K. This suggests a potential easing of wage pressures, as average weekly earnings for the three months to February slowed to 3.8%, the first time since 2020 when it fell below 4%. Job vacancies have also declined to 711K, the lowest since 2021, indicating a cooling labor demand.
What makes this particularly fascinating is the potential impact on inflation. If softer wage growth and increasing economic slack translate into weaker services-sector inflation, it could ease concerns about inflation effects caused by the current energy shock. This could be a significant development, as the Bank of England (BoE) has been closely monitoring these factors.
However, Wells Fargo analysts remain cautious, highlighting potential distortions from base effects and the recent increase in the National Living Wage. This underscores the need for a nuanced interpretation of the data.
Canadian Inflation and Energy Prices
Canada's inflation picture is also worth watching. The consensus for CPI m/m is an increase of 0.6%, down from the prior 0.9%. The annual figure is expected to remain at 2.6%, with the median CPI y/y easing to 2.2% from 2.3%. Trimmed CPI y/y is expected to stay at 2.2%.
What many people don't realize is the impact of energy prices. Analysts from RBC forecast a sharp pickup in headline CPI due to a surge in energy prices, particularly gas price spikes from March and April caused by the conflict in the Middle East. This is the first annual reading not influenced by the removal of the consumer carbon tax in April 2025, but the federal fuel excise tax removal will have a bigger impact in next month's data.
Despite this, underlying price pressures are viewed as relatively contained. Food inflation remains elevated but stable, while broader core measures are expected to edge lower on an annual basis as earlier strong readings fall out of the comparison period.
The Bank of Canada will closely monitor whether higher energy prices begin feeding into other inflation measures. For now, this does not appear to be the case, but the duration of elevated oil prices will be crucial.
Australia's Labor Market Resilience
Australia's labor market is expected to show modest job gains, with a consensus for employment change of 15.7K, down from the prior 17.9K. The unemployment rate is projected to remain unchanged at 4.3%. Recent data suggests the labor market remains broadly resilient, with employment expanding at a steady pace on a three-month average basis.
However, Westpac analysts warn of potential distortions due to seasonal factors, particularly the overlap of the survey period with the Easter holiday. Underlying labor market conditions have not shown clear signs of deterioration related to the Middle East conflict or recent rate hikes, suggesting that the softer April outlook reflects caution around short-term volatility.
From a monetary policy perspective, inflation remains the RBA's primary focus, meaning this release is unlikely to materially influence the Bank's near-term outlook unless there is a significant surprise.
U.S. Housing Starts and Building Permits
In the U.S., housing starts are expected to cool, with a consensus of 1.4M, down from the prior 1.5M. Building permits are expected to rise slightly from 1.37M to 1.38M. Despite a strong reading in March, Wells Fargo analysts believe that residential construction is downshifting overall, with weather-related slowdowns in February affecting the March gains.
Building permits have continued to trend lower year-to-date, down 2.6% as of March, with the single-family segment most affected. Builders are responding to affordability pressures, softer demand, and elevated inventories. Multifamily activity has been more resilient, supported by steadier rental market conditions and improved financing costs.
Canadian Retail Sales Resilience
Canada's retail sales data shows resilience, with core retail sales m/m expected at 0.9%, up from 0.5%. Household spending has remained steady, with RBC card transaction data showing resilience into Q1 2026 despite the new oil price shock.
In summary, the upcoming week's economic data releases will provide valuable insights into the labor market and inflation dynamics across these regions. While some softening is expected, the potential distortions and underlying factors should be carefully considered. The market's reaction to these data points will be crucial in shaping near-term economic expectations.
