UK: Gov't Unveils Above Inflation, Above Recommendation Public Sector Pay Rises
May-22 13:26
The UK gov't is outlining the level of pay increases public sector workers are set to receive.
- In the healthcare sector, doctors will receive a basic 4% pay increase, with other NHS workers such as nurses receiving a 3.6% rise, and senior managers 3.25%. Junior or 'resident' doctors will receive an increase of between 5-6% and a consolidated sum of GBP750.
- Teachers will receive a 4% increase.
- Members of the armed forces will receive a 4.5% pay rise, with senior military figures receiving a 3.75% increase.
- Senior civil servants will receive a 3.25% increase.
- Prison officers' wages will increase by 4% in 2025/26, covering managers and governors as well.
All of these pay rises exceed inflation and the 2.8% increase that the gov't previously recommended across the public sector. Unions objected, saying the figure was too low and threatened industrial action if the number was not increased.
- In April, after the pay review body recommended a 4% increase for teachers and the NHS equivalent said 3% was recommended for health workers, the gov't said that any increased funding could not come from new cash.
- This means that the funds will either have to come from cuts elsewhere within departmental budgets or tax increases.
- The pay increases come as attention turns towards the gov'ts spending review. Gov't spending figures for April coming in above expectations bring further attention to the long-term departmental spending plans that Chancellor of the Exchequer Rachel Reeves will present on 11 June.
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EUROZONE DATA: Soft Data Key To Near-term ECB Outlook; April Flash PMIs In Focus
Apr-22 13:20
Soft data will be key in charting the Eurozone’s economic trajectory in the coming months, with hard data significantly lagging volatile US tariff developments. That puts focus on this afternoon’s flash EC consumer confidence reading, tomorrow’s April flash PMIs and Thursday’s April German IFO survey.
- Last Thursday’s post decision Reuters sources piece noted that “some ECB policymakers see a high chance of a further interest rate cut in June” (in line with current market pricing), while others who are thus far undecided “want to see how soft indicators of economic activity and other variables such as energy prices pan out before making any predictions about their next meeting”.
- Within the PMIs, the new export orders component will be closely watched. Goldman Sachs have written that “statistical analysis implies that a 1pt pullback in new export orders predicts a hit to year-over-year export growth in most countries (3⁄4pp on average), suggesting that a survey pullback will subsequently show up in actual export data”.
- Analysts expect the Eurozone-wide composite PMI (due 0900BST/1000CET tomorrow) at 50.2 in April, which would fully unwind March’s 0.7pp bounce to 50.9. Services is seen at 50.5 (vs 51.0 prior) and manufacturing at 47.4 (vs 48.6 prior).
- Similar dynamics are expected in the French (due 0815BST) and German (0830BST) readings.
US DATA: Johnson Redbook Points To Solid April For Retailers, With Some Caveats
Apr-22 13:19
April is shaping up as solid for retail sales, with Johnson Redbook Same-Store Retail month-to-date Y/Y sales up 7.0% (the week ending April 19 was +7.4% Y/Y).
- This brings month-to-date retail sales in the series (which captures around 80% of Census Bureau retail sales) above retailers' targeted 6.4% gain.
- If the current rate is sustained for the full month, April Johnson Redbook retail sales would be the strongest Y/Y since December 2022.
- The latest gain is party a calendar effect, however, which may be partially paid back next week as "a later Easter [compared to 2024] contributed to higher sales volume during the week", and "retailers anticipate declining sales volume next week, as most businesses closed for Easter Sunday".
- But anecdotes were generally positive: "the warm weather had a positive impact on the seasonal apparel market... food and consumables also performed well. Additionally, home improvement and outdoor merchandise showed signs of increased demand as the season changes.
- There was also some indication of tariff front-running continuing in the week: "shoppers took the opportunity to stock up on essential items and larger purchases to avoid upcoming tariff hikes."
STIR: SONIA June ‘25/June ’26 Spread Threatens Clean Break Below Cycle Low
Apr-22 13:15
The SONIA June ‘25/June ’26 (SFIM5/M6) spread is threatening a clean break of the prior cycle low at -60.0bp.
- SFIM5/M6 now presents the most obvious dovish pressure point to us (over a multi-month horizon), with much of the dovish move seen in SFIM5/M6 since late March explained by the move in SFIM5/Z5 (~29bp of the ~34bp sell off).
- We previously identified June ‘25/December ’25 (SFIM5/Z5) as a spread of focus for those looking to express a dovish view.
- The pricing of cuts beyond year-end remains relatively flat (~10bp of cumulative easing priced between the Dec ’25 MPC-dated OIS and Mar ’26 contract), with the BoE’s gradualist approach to rate cuts and lingering inflationary risks seemingly providing some limitations to further dovish repricing at this stage.
- Note that this morning’s comments from the usually hawkish BoE MPC member Greene (detailed earlier) may have signalled a shift to a more centrist view, removing one potential hurdle to a deeper cutting cycle.
- While U.S. policy continues to present global inflationary risks, related downside risks to economic growth and the level of Bank Rate give the BoE plenty of room for further easing, if they choose to counter any future downside growth shocks.
- Tomorrow’s flash PMI data provides the next key dataset of note, with subsequent commentary set to come from BoE’s Pill, Bailey & Breeden.
Fig. 1: SONIA June ‘25/December ’25 & June ‘25/June ’26 Spreads
Source: MNI - Market News/Bloomberg
