Pay increases remain just below inflation

Settlements recorded on the LRD Payline database showed a median pay rise of 4.0% in the three months to February – the same as in the three months to January, meaning that pay settlements continue to lag slightly behind inflation.

The 4.0% median applies across all types of workers and sectors except the public sector, for which the median increase was 3.4%.

Inflation

Growth in the retail prices index (RPI) was unchanged for the year to February at 4.1%, while the RPI excluding mortgage interest payments (RPIX) increased from 3.4% to 3.7%. Growth in the government’s preferred measure of inflation, the consumer prices index (CPI), rose even further above its 2.0% target rate – it now stands at 2.5%, up from 2.2% in January.

Forecasts for inflation have also risen slightly, with the average forecast for the RPI in the fourth quarter of 2008 now 2.7%.

Earnings

The average earnings index (including bonuses) for the whole economy rose by 3.5% in the year to January, slightly down on December’s 3.6%, while the figure excluding bonuses dropped from 3.7% to 3.6%.

Increases in public-sector earnings have raced ahead of those in the public sector (3.6% compared to 3.4%). Manufacturing earnings increases (3.9%) remain higher than those in services (3.6%) in services, but by a narrower margin than in December.