Settlements move ahead of inflation

THE latest figures from LRD’s Payline database show the median for settlements in the three months to November up slightly at 3.9% from 3.8% in October. The variations between sectors have increased, with private sector settlements having a median of 4.2% but the public sector median being only 3.0%. The manufacturing median was 3.9% whilst in services it was 4.0%.

Inflation continued to fall on all three measures with the Retail Prices Index (RPI) dropping to 3.0% for the year to November from the October figure of 4.2%. RPIX (which excludes mortgage interest payments) fell to 3.9% from 4.7% in October. The government’s preferred measure, the Consumer Prices Index (CPI), also fell to 4.1% for the year to November from 4.5% in October.

Average earnings increased by 3.7% in the year to October, with the increase being the same whether bonuses are included or excluded. The only difference in the average earnings figures is between manufacturing where the increase was only 2.9% and services where it was 3.9% (including bonuses). If bonuses are excluded the gap widens further with manufacturing only 2.1% but services increasing by 4.0%.

The inflation figures are set to move dramatically downwards in 2009. The latest figures on forecasts for the fourth quarter of 2009 are that the RPI will decline with the average (mean) forecast being -0.8% and the median -1.0%. The lowest forecast for the RPI is -3.2% and the highest is +1.7%.