Pay increases remain lower than inflation

The latest figures from the LRD Payline database show a median increase of 3.0% for the whole economy in the three months to September. Once again this figure applies uniformly across the industrial/services divide, and to both manual and non-manual workers; the only variation is in the private sector, where the median pay rise was 3.1%.

With growth in the retail prices index (RPI) increasing again (see below), the gap between increases in basic pay and inflation is now at its highest level for some years.

Inflation

RPI growth rose in the year to September to 3.6%, up 0.2 percentage points on the August figure. This means that inflation is now half as high again as it was just six months ago (2.4% in the year to March), while settlements have remained constant throughout the year.

However, growth in the RPI excluding mortgage interest payments fell slightly to 3.2%. And the government's preferred consumer prices index (CPI) also experienced a slowdown, with the 2.4% September figure slightly below August's 2.5%.

Earnings

The Average Earnings Index rose by 3.9% in the year to August, but with significant variations between sectors. While earnings growth in the private sector was 4.0%, the public sector figure managed just 3.2%, and manufacturing earnings outstripped those in the service sector (5.0% compared with 3.8%).