By Daniel Hunter
The VocaLink Take Home Pay Index, released today (Tuesday), reveals the sustained slow pay growth across the VocaLink indices. Sluggish growth continues and pressure remains on wage growth across all sectors. At the same time utility bill increases and university tuition fees are placing upward pressure on inflation, impacting the real value of wage packets.
The VocaLink FTSE 350 Take Home Pay Index pay growth slowed to 0.5% in the three months to February, down from a previous reading of 0.7%. Since October 2012 the FTSE 350 Index has fluctuated below 1% growth, representing weaker take home pay growth at the start of 2013 than seen at the beginning of 2012.
The VocaLink Manufacturing Sector Index was the only VocaLink Take Home Pay sector to show marginal pay growth improvement in the three months to February, rising to 1.1% compared to a previous reading of 0.2%. This may be a short-lived improvement, however, as the Purchasing Managers Index for manufacturing shows contraction in the sector in February. This reduction in industry activity is likely to impact jobs, placing downward pressure on pay growth.
Annual growth on the VocaLink Services Index fell slightly in the three months to the end of February, at 0.4% compared to a previous reading of 0.7%. This is the weakest pay growth experienced by the Services Index since March 2011, reflecting a fall in service sector output in the final quarter of 2012.
The VocaLink Public Sector take home pay growth also slowed slightly in the three months to February, with annual growth standing at 0.5%. This continues the relatively flat take home pay growth experienced in the public sector in the past 10 months, during which time pay growth has not risen above 0.7%.
Commenting on this month’s findings, David Yates, Chief Executive Officer at VocaLink, said: “The VocaLink Take Home Pay Index continues to reveal slow cross-sector pay growth against a backdrop of elevated inflation rates. This combination of falling take home pay growth and a rising cost of living places a significant squeeze on the real spending power of workers’ wage packets, which in turn damages consumer spending levels.
"Growth in retail sales volumes continued to slow in the three months to January, rising just 0.2% year-on-year — this is the lowest rate since October 2011. With inflation predicted to remain relatively high, overall retail sales growth is likely to remain low throughout 2013.”
Douglas McWilliams, Chief Executive of economics consultancy Cebr, said:
“The rate of inflation continues to run well in excess of growth on the VocaLink Take Home Pay Index. Rises in rent and utility bills continue to make the largest contribution to the rising cost of living, with utility bills rising at a rate of 3.5% in the year to January. What’s more, increases in university tuition fees and the weakness of Sterling will both contribute to increased inflation.”
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