Pay Bulletin in May | EEF

Pay Bulletin in May

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Our Pay Bulletin for May was published earlier this week. It is a monthly comprehensive survey of pay settlements, deferments and pay freezes in over 400 of our member companies. It consists of two main parts: pay trends and inflation trends.

How is pay trending?The three-month average pay settlement edged down to 2.5% year on year in April, from a downwardly revised figure of 2.6% in March. After the revisions, our data are now consistent with the average level of settlements we have seen since the beginning of 2011.

Source: EEF Pay Bulletin

The proportion of pay freezes was stable at 6% in the three months to April. The figure has been slowly picking up since the beginning of 2014, as shown below:

Source: EEF Pay Bulletin

The labour market statistics published by the ONS on Tuesday confirmed that, despite slowing slightly, pay growth in manufacturing continues to outpace trends in the broader economy. In the three months to March, pay rose by 2.9% year on year in manufacturing, a drop of 0.3 percentage points from the three months to February; whereas in the whole economy, pay rose by 1.7%, unchanged from the previous month.

And what about inflation? UP!The annual CPI rate of inflation rose 0.2 percentage points to 1.8% in April, the first rise in ten months. The increase in the rate was mainly driven by higher airfares and transport costs, as well as motor fuels prices. Apparel sales seem to be blossoming (Easter and new Spring/Summer stocks), as prices have risen across some retailers. Declining prices of food and non-alcoholic beverages offset the upward movement moderately.

As the Easter effect on airfares and retails fades, we expect to see CPI inflation stabilise below the 2% target for the rest of the year. As we reported in previous months, there is so far little sign of any emerging inflationary pressures from manufacturers, commodities or the supply chain, whilst the stronger pound will continue to push down import prices. Wage growth expectations from various surveys suggest that pay settlements will only take a gradual step up. The chance of a significant upward revision to the near-term inflation forecast therefore, is relatively low.

For a more in-depth insight of the CPI, please refer to Felicity's blog from Tuesday.


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