Inflation and earnings
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Inflation forecasts
First quarter 2007: Range 4.0% to 4.6%; average 4.3%
Second quarter 2007: Range 3.2% to 4.4%; average 3.9%
Average earnings forecasts
First quarter 2007: Range 3.9% to 5.0%; average 4.4%
Second quarter 2007: Range 3.9% to 4.8%; average 4.4%
The headline rate of inflation, as measured by the annual change in the all-items retail prices index (RPI), was 4.2% in January 2007, down from 4.4% in December 2006.
The all-items index fell by 0.5% between December 2006 and January 2007, to 201.6.
Underlying inflation - the 12-month change in the all-items RPI excluding mortgage interest payments (RPIX) - was 3.5% in January 2007, down from December 2006.
The consumer prices index (CPI), formerly known as the harmonised index of consumer prices (HICP) - an EU measure of inflation similar to RPI - rose by 2.7% in the year to January 2007, down from 3% a month earlier.
|
Retail prices index |
|||
|
|
All-items index |
Underlying index |
|
|
2006 |
Jan |
2.4 |
2.3 |
|
Feb |
2.4 |
2.3 |
|
|
Mar |
2.4 |
2.1 |
|
|
Apr |
2.6 |
2.4 |
|
|
May |
3.0 |
2.9 |
|
|
Jun |
3.3 |
3.1 |
|
|
Jul |
3.3 |
3.1 |
|
|
Aug |
3.4 |
3.3 |
|
|
Sep |
3.6 |
3.2 |
|
|
Oct |
3.7 |
3.2 |
|
|
Nov |
3.9 |
3.4 |
|
|
Dec |
4.4 |
3.8 |
|
|
2007 |
Jan |
4.2 |
3.5 |
Source: Office for National Statistics , Consumer Price Indices, published 13 February 2007. Next figures 20 March 2007. tel: 020 7533 5866 for recorded message.
Note: RPI is published each month on the base January 1987 = 100.
Inflation Latest data on inflation from HR & Compliance Centre's key economic indicators service.
Consumer Price Indices Download the latest official inflation data from the Office for National Statistics.
The seasonally adjusted whole-economy average earnings (including bonuses) growth in the year to December 2006 was 4%, down from the figure for November. The "headline rate" is the average of the annual change in the seasonally adjusted series over the past three months.
Earnings in the private sector rose at a headline rate of 4.1% in the year to December 2006 down from the year to November) compared with 3.2% in the public sector unchanged from a month earlier).
In manufacturing industries, earnings increased at a headline rate of 4.5% in the year to December 2006, down from that recorded a month earlier.
In service industries, average earnings rose at a headline rate of 4.2% in the 12 months to December 2006. This was unchanged from the level recorded in November.
|
Average earnings index | ||||||
|
|
|
Whole economy |
Private sector |
Public sector |
Manufacturing |
Services |
|
2005 |
Dec |
3.6 |
3.4 |
4.4 |
4.4 |
3.4 |
|
2006 |
Jan |
3.6 |
3.4 |
4.4 |
4.6 |
3.4 |
|
Feb |
4.1 |
4.1 |
4.3 |
4.9 |
3.9 | |
|
Mar |
4.1 |
4.2 |
4.2 |
5.0 |
4.1 | |
|
Apr |
4.3 |
4.5 |
3.8 |
5.3 |
4.2 | |
|
May |
4.1 |
4.2 |
3.6 |
5.5 |
3.9 | |
|
Jun |
4.3 |
4.5 |
3.4 |
5.9 |
4.1 | |
|
Jul |
4.4 |
4.6 |
3.8 |
5.5 |
4.3 | |
|
Aug |
4.2 |
4.3 |
3.6 |
5.3 |
4.1 | |
|
Sep |
3.9 |
4.0 |
3.5 |
5.2 |
3.9 | |
|
Oct |
4.1 |
4.2 |
3.3 |
5.2 |
4.1 | |
|
Nov |
4.1 |
4.3 |
3.2 |
5.1 |
4.2 | |
|
Dec |
4.0 |
4.1 |
3.2 |
4.5 |
4.2 | |
Source: Office for National Statistics, Labour Market Statistics, published 14 February 2007. Next figures 14 March 2007; tel: 020 7533 6176 for recorded message.
Average earnings Latest data on average earnings from HR & Compliance Centre's key economic indicators service.
Labour Market Statistics Download the latest official inflation data on unemployment and average earnings from the Office for National Statistics (ONS).
Inflation forecasts: RPI expectations up again
Inflation on the retail prices index measure stood at 4.2% in the year to January 2007 - down from the previous month - with the largest downward effect from falling household goods prices. Expectations for RPI in the first quarter remain high, however. The addition of new forecasts from the National Institute of Economic and Social Research and Oxford Economic Forecasting mean that our panel's forecast for headline inflation in the first quarter of 2007 has been revised upwards once again, to stand at 4.3%. However, RPI inflation is expected to fall back to 3% by the final quarter of the year.
Oxford Economic Forecasting: "While growth is expected to remain relatively strong in 2007, inflationary pressures should subside thanks to both lower world energy prices and subdued consumer demand." Forecast: Headline inflation to peak at 4.5% in the first quarter of 2007, falling to 4.3% in the second quarter and dropping back to 3.2% by year end.
|
Forecast of annual rate of change in retail prices, 20071 | |||||
|
|
2007 | ||||
|
Retail prices |
Q1 |
Q2 |
Q3 |
Q4 |
Year |
|
Barclays Capital |
4.4% |
3.9% |
3.5% |
3.3% |
3.8% |
|
CBI |
4.1% |
3.7% |
3.4% |
3.2% |
3.6% |
|
CSFB |
4.6% |
4.1% |
3.6% |
3.6% |
4.0% |
|
Goldman Sachs |
4.5% |
4.4% |
3.8% |
3.3% |
4.0% |
|
HSBC Markets |
4.0% |
3.2% |
2.7% |
2.5% |
3.1% |
|
Lehman Brothers |
4.3% |
4.0% |
3.3% |
2.9% |
3.6% |
|
NIESR |
- |
- |
- |
- |
4.0% |
|
Oxford Economic Forecasting |
4.5% |
4.3% |
3.6% |
3.2% |
3.9% |
|
Royal Bank of Scotland |
4.1% |
3.7% |
3.3% |
2.9% |
3.5% |
|
UBS |
4.2% |
3.6% |
2.8% |
2.7% |
3.5% |
|
PABB average2 |
4.3% |
3.9% |
3.3% |
3.0% |
3.7% |
|
Range of forecasts |
4.0%-4.6% |
3.2%-4.4% |
2.7%-3.8% |
2.5%-3.6% |
3.1%-4.0% |
1. Based on the latest figures available on 8 February 2007: CBI - September 2006; Goldman Sachs - January 2007; Oxford Economic Forecasting - January 2007; NIESR - January 2007.
2. Pay and Benefits Bulletin average: unweighted average of the analysts' predictions.
Source: Individual forecasting organisations.
Average earnings forecasts: Earnings growth to remain benign
Whole-economy average earnings growth was 4% in December 2006, remaining particularly low in the public sector, where growth averaged 3.2%. While concerns remain over the contribution of higher pay awards to earnings growth, some point to both the recent increases in labour supply and public sector pay restraint as two factors that should keep future growth in check. Our panel expects earnings growth to average 4.4% in the first two quarters of 2007, dropping back to 4.2% in the final quarter of the year.
NIESR: "Our forecast is for average earnings growth to remain relatively stable in the near term, at around 4.75%. Despite levels of RPI inflation at their highest for over a decade, rising unemployment is expected to help keep earnings growth in check. We also note that the chancellor is committed to keeping public sector wage growth under control." Forecast: Earnings growth of 4.6% over 2007.
|
Forecast of annual rate of change in earnings, 20071 | |||||
|
|
2007 | ||||
|
Earnings, whole economy |
Q1 |
Q2 |
Q3 |
Q4 |
Year |
|
Barclays Capital |
4.4% |
4.3% |
4.6% |
4.7% |
4.4% |
|
CBI |
4.2% |
4.5% |
4.4% |
4.0% |
4.3% |
|
CSFB |
5.0% |
4.5% |
4.5% |
4.5% |
4.6% |
|
Goldman Sachs |
4.5% |
4.8% |
4.2% |
4.2% |
4.4% |
|
HSBC Markets |
4.4% |
4.4% |
4.2% |
4.1% |
4.3% |
|
Lehman Brothers |
4.4% |
4.2% |
4.3% |
4.1% |
4.2% |
|
NIESR |
- |
- |
- |
- |
4.6%3 |
|
Oxford Economic Forecasting |
4.8% |
4.5% |
4.2% |
4.2% |
4.4% |
|
Royal Bank of Scotland |
4.3% |
4.4% |
4.3% |
4.2% |
4.3% |
|
UBS |
3.9% |
3.9% |
3.9% |
4.0% |
3.9% |
|
PABB average2 |
4.4% |
4.4% |
4.3% |
4.2% |
4.3% |
|
Range of forecasts |
3.9%-5.0% |
3.9%-4.8% |
3.9%-4.6% |
4.0%-4.7% |
3.9%-4.6% |
1. Based on the latest figures available on 8 February 2007: CBI - September 2006; Goldman Sachs - January 2007; Oxford Economic Forecasting - January 2007; NIESR - January 2007.
2. Pay and Benefits Bulletin average: unweighted average of the analysts' predictions.
3. Based on National Accounts data, which is defined as employee compensation per employee job, taking into account items such as pensions costs and national insurance contributions.
Source: Individual forecasting organisations.
