Pay closes the gap slightly on inflation

The median value of pay settlements recorded on our Payline database increased by 0.2 percentage points to 3.7% in the three months to June, with the private sector median rising to 4.0% while its public sector counterpart remained at 3.0%. Service sector deals are still outstripping those in manufacturing, with medians of 4.0% and 3.5% respectively. Looking back over the 12 months to June, the median increase on lowest basic pay has been 3.5%.

Inflation

The Retail Prices Index (RPI) rose by 4.4% in the year to June, slightly up on the May figure of 4.3%. The RPI excluding mortgage index payments (RPIX) maintained steady growth of 3.3%, while the Consumer Prices Index (CPI) increased by 2.4% – just below the 2.5% seen in the year to May. With the RPI remaining well above 4%, it is unsurprising that the average forecast of inflation for the last three months of 2007 has been revised upwards again to 3.7%.

Earnings

Growth in average earnings for the year to May was up 3.5%, 0.1 percentage points higher than April’s revised figure. The increase was accounted for by manufacturing earnings, which were up sharply to 4.5% while the service sector’s earnings growth fell back to 3.4%.

If bonuses are excluded, the overall increase was 3.4%, with the private sector up by 3.5%, the public sector by 3.1%, manufacturing by 3.8% and services by 3.5%.