Pay increases take a fall as inflation rises

The latest figures from LRD’s Payline database show pay settlements dropping back to a median increase of 3.3% in the three months to October – well below the 4.0% recorded for the three months to September.

The gap between increases in the public and private sectors has narrowed, with the private-sector median down by 0.8 percentage points at 3.5% and the public sector on 2.8%. With growth in the retail prices index (RPI) back on the increase, pay rises are once again lagging behind inflation.

Inflation

All three measures of inflation increased in the year to October. The RPI increased by 4.2%, up from 3.9% in the year to September, and growth in the RPI excluding mortgage interest payments (RPIX) climbed from 2.8% to 3.1%. The Consumer Prices Index rose by 2.1% in October; the September figure was 1.8%.

Earnings

Average earnings growth (including bonuses) across the whole economy in the year to September was 4.2%, representing no change on the figure reported in August.

Earnings in manufacturing rose by only 2.1%, but in services the growth rate was 4.5%. And while the private sector saw average increases of 4.4%, earnings in the public sector increased by just 3.2%.

If bonuses are excluded, the increases were 3.5% for the whole economy, 3.2% in manufacturing and 3.7% in services.