Settlements are steady as inflation falls

Pay deals recorded on LRD’s Payline database are running slightly ahead of inflation for the first time since July 2007. The median pay increase in the three months to March was unchanged at 4.0%, while the retail prices index (RPI) grew by 3.8% in the year to March – down from 4.1% the previous month.

Pay awards in the public sector remained well below their private-sector counterparts at 3.0%, while pay growth for non-manual workers fell back a little to 3.9%.

Inflation

The RPI’s slowdown also applied to the RPI excluding mortgage interest payments, which rose by 3.5% (previously 3.7%) in the year to March. But the government’s preferred measure of inflation, the consumer prices index (CPI), remained at 2.5% – well above its 2.0% target figure.

Forecasts for inflation have again edged upwards, with the average forecast for the final quarter of 2008 now standing at 2.8%.

Earnings

The average earnings index (including bonuses) for the whole economy rose by 3.6% in the year to February, slightly down on the revised January figure of 3.6%. If bonuses are excluded, earnings grew by 4.0% – up from January’s 3.6%.

Public-sector earnings continue to rise faster than those in the public sector (by 4.1% compared to 3.5%), while earnings increases in services are now greater than those in manufacturing.