RPI drops to 49-year low

The Retail Prices Index (RPI) for the year to January 2009 saw an increase of just 0.1% — the lowest level since March 1960. This continued the dramatic fall from the 5.0% recorded for the year to September 2008.

The latest figures from LRD’s Payline database show that negotiated pay increases in the three months to January 2009 had a median of 3.9%, slightly down from the 4.0% recorded for the three months to December 2008. The gap between public and private sector settlements narrowed further with the public sector median increase rising to 3.4% whilst the private sector median was unchanged at 4.0%. The gap between manufacturing and services settlements has widened with the median for manufacturing dropping to 3.5% whilst that for services, although down, was still 4.2%.

Other measures of inflation have continued a more leisurely decline. RPIX (which excludes mortgage interest payments) was down to 2.4% for the year to January from 2.8% in the year to December. The Consumer Prices Index (CPI) fell to 3.0% in the year to January from 3.1% for the year to December.

Government figures on average earnings show that the increase for the whole economy in the year to December 2008 was 3.2% (including bonuses) with manufacturing having average increases of only 2.2% but services 3.7%. The public sector appears to be doing better than the private sector even when bonuses are excluded, with the public sector on 3.7% and the private sector on 3.5%.