Slowdown in inflation and pay continues

The latest figures from LRD’s Payline database show a 3.2% median increase in pay across the whole economy for settlements starting in the three months to January.

There is some variation between sectors, with manufacturing and public sector increases both running below the overall level at 3.0%.

The median for the period since August is 3.0%, indicating that settlements have picked up slightly after a slow start to the pay round.

Inflation

Growth in the retail prices index (RPI) in the year to January was 2.4%, back up to its November level. The RPI excluding mortgage interest payments (RPIX) also increased, from 2.0% in December at 2.3%.

But the government’s preferred measure, the consumer prices index (CPI), fell to 1.9% – and the December figure was revised to 1.9% too. Unlike the RPI, CPI indices can be revised by the Office for National Statistics; reps should bear this in mind if employers propose the CPI as an inflation measure for negotiations.

The latest independent forecasts collated by the Treasury show an average prediction of 2.2% for the RPI in the fourth quarter of 2006.

Earnings

The latest average earnings figures, for the year to December 2005, show a sharp upward movement to 4.2% for the whole economy. But considerable variations between sectors remain: public sector increases averaged 4.8% compared to 4.0% in the private sector, for example.