Pay awards close the gap on inflation

The gap between settlements and inflation has narrowed a little, with the median pay increase on the LRD Payline database rising to 3.5% in the three months to January while growth in the retail prices index (RPI) dropped back slightly to 4.2%.

The median value of settlements is almost one percentage point higher among private firms than in the public sector, although there is little difference between median pay rises in manufacturing and services. The longer-term trend is unchanged at 3.0%, both for the payround since August 2006 and over the past year.

Inflation

The RPI's slowdown was matched by reduced growth in the RPI excluding mortgage interest payments (RPIX), which fell back to 3.5% in the year to January from 3.8% the previous month, and in the consumer prices index (CPI) - now back to 2.7% after December's record high of 3.0%.

Earnings

The average earnings index rose by 3.8% in the year to December, down a little the previous month's 3.9%. Public sector earnings growth caught up slightly with its private counterpart, and services saw a small gain while manufacturing earnings growth dropped sharply to 3.7%.

If bonuses are excluded, the average increase across the whole economy was 3.7%, with the private and public sectors at 3.8% and 3.1% respectively. Manufacturing earnings rose by 4.0%, and those in services by 3.7%.