Slowdown in inflation and pay continues

Settlement levels are continuing to decline slowly, with the LRD Payline database showing a median increase of 3.0% in the three months to November - down from a high in July of 3.5%. This mirrors the trend in the Retail Prices Index (RPI), which was 2.9% for the year to July but 2.4% for the year to November.

However, private sector settlements are still running at a median 3.5%, with both manual and manufacturing settlements showing a median increase of 3.4%.

The annual increase for the year to November was 3.4%, or 3.8% if weighted by workers covered, indicating that those in larger bargaining groups have received higher rises.

Inflation

Like the "full" RPI (see above), the RPI excluding mortgage interest payments (RPIX) and the Consumer Prices Index (CPI) have both slowed down; their annual increases for the year to November were 2.3% and 2.1% respectively. This takes the CPI - the government's preferred measure of inflation - close to chancellor Gordon Brown's 2.0% target.

Earnings

The increase in the Average Earnings Index for the year to October was sharply down on the previous month at 3.0%. In manufacturing, the increase in average earnings for the year was still 4.5%, but in services it had fallen to 2.6% (and just 2.1% in private sector services).

The annual increase in the private sector was down to 2.8%, while the public sector managed 4.1%.