Pay deals close the gap on inflation

The latest figures from LRD’s Payline database show that the median for all settlements in the three months to December moved up to 3.9% from November’s 3.6%. With growth in the retail prices index (RPI) dropping by 0.3 percentage points to 4.0% for the year to December, the gap between settlements and inflation looks to have narrowed sharply.

However, the level of settlements varies greatly across the economy: the private sector median increase was 4.0%, but pay restraint in the public sector has kept settlements down to a 3.0% median.

Inflation

Alongside December’s RPI slowdown, growth in the RPI excluding mortgage interest payments (RPIX) fell from 3.2% in November to 3.1%. The consumer prices index (CPI), the government’s preferred measure which excludes housing costs, remained unchanged at 2.1% for the third month running.

Earnings

In the year to November, the average earnings index (including bonuses) for the whole economy rose by 4.2%; the comparable figure for October was 3.7%. If bonuses are excluded, earnings growth was 3.7% – up from 3.5% a month earlier.

The 4.2% rise in service-sector earnings was far larger than the 3.1% experienced by manufacturing workers, but the difference was almost entirely the result of bonuses; if these are excluded, the figures were 3.8% and 3.7% respectively.