Australian wage inflation was released last Wednesday with overall wage growth of 0.5% for the March quarter disappointing market expectations. Annual wage inflation remained flat at 2.1% for the year (Dec-17: 2.1%) This came against a backdrop of a looser labour market with the unemployment rate increasing to 5.6% A key driver of this move however was the increase in people seeking work with the participation rate rising from 65.5% to 65.6%. If this was flat over the two months, the unemployment rate would have remained unchanged but instead we have a positive sign of workers coming back to the workforce with participation rates in recent months tracking at heights not seen since November 2010.

In addition, total employment growth surprised with the labour force expanding by 22.6k. The bulk of this improvement came in full-time jobs with 32.6k growth offset by a notable decline of 10k in part-time roles. This amounted to a recovery in full-time jobs growth which had declined in the March quarter while the part-time job decline reflected the volatility in these figures coming after growth in March, a drop in February and a strong start to the year with 45k part-time roles added in January.

US retail sales rose 0.3% in the month of April (4.7% annually) in line with market expectations with rising oil prices eating into discretionary spending. Core retail sales—excluding automobiles, gasoline, building materials and food services— rose 0.4% over the month, a positive sign for underlying consumer spending.

Chinese industrial output expanded by 7% year-on-year in April ahead of market expectations while conversely, fixed-asset investment growth slowed to 7% per annum. Retail sales grew slower than expected at 9.4% per annum with economists sticking by forecasts that economic growth will slow from the March quarter print of 6.8% to somewhere closer to Beijing’s 6.5% target for calendar year 2018.

Equity markets showed mixed performance with the ASX and S&P500 trading slightly lower over the week while Emerging Market equities struggled in the face of a rising US Dollar. In US news, we had a mix of digesting the implications of higher bond yields with the 10-year yield hitting the 3.10% mark as well as the implications of ongoing trade negotiations with China which offered to cut the US trade deficit by $200bn as a concession. European indices shrugged off the prospect of a debt forgiveness program and European exit by Italy, rising higher on the back of positive earnings results.

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