Pay increases move ahead of prices again

The latest figures from our Payline database show a sharp increase, with settlements in the three months to the end of July achieving a median pay rise of 4.2% — higher than inflation for the first time in months.

Private sector pay rises remain well ahead of those in the public sector, with medians of 4.3% and 3.3% respectively, but the gap between manufacturing and service sector settlements has narrowed to just 0.2 percentage points.

Inflation

Whichever measure is used, inflation slowed in the year to July. The rate of growth in the Retail Prices Index (RPI) fell sharply to 3.8% from its June figure of 4.4%, and the RPI excluding mortgage interest payments (RPIX) grew by just 2.7% – down from 3.3% the previous month. The Consumer Prices Index (CPI), which had risen by 2.4% in the year to June, saw a 1.9% increase.

However, forecasts of inflation in the fourth quarter of this year still average 4.0%.

Earnings

Growth in average earnings for the year to June was 3.1%, down from the 3.5% for the year to May. While manufacturing continues to outstrip services in earnings growth (3.9% compared to 3.0%), both sectors saw a slowdown. And both the public and private sectors showed average increases of 3.0% for the year.

If bonuses are excluded, the increases were 3.5% for the year to June, the same as in May.