Prices are rising faster than earnings

For the first time in nearly four years, inflation is outstripping growth in average earnings. While pay settlements recorded on the LRD Payline database have continued at the slightly higher level of 3.3% reached in November, inflation has surged ahead to 4.4% but earnings growth has fallen back slightly to 3.9%.

Across all sectors, the Payline figures for the three months to December show little or no change from November, although settlements in services have closed up slightly with those in manufacturing.

Inflation

Growth in the retail prices index (RPI) is now at its highest since the 4.5% recorded in December 1991. And growth in the RPI excluding mortgage interest payments (RPIX) is now 3.8%, a level not seen since October 1992. The consumer prices index (CPI) rose by 3.0% in the year to December - its highest rate since it began in January 1997.

Earnings

The slowdown in the average earnings index (which rose by 3.9% in the year to November, down from October's revised 4.2% figure) is matched across all sectors, with public sector earnings growth down to 3.1%. The whole-economy figure is below that for either manufacturing or services - the result, according to National Statistics, of low earnings growth in the rest of the economy.

If bonuses are excluded from the calculation, the whole-economy increase to November was 3.6%.