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Virtuous cycle will go into reverse next year

The jump in wage growth in April provides tentative evidence that the strong pay results agreed in this year's spring wage negotiations are starting to filter through and we expect regular earnings growth to accelerate to 2.7% by the second half of the year. But while the strength in corporate profits coupled with a tight labour market may embolden trade unions to push for another large pay hike next year, we still think that the slowdown in inflation will prompt some moderation.

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