By Daniel Hunter
The VocaLink Take Home Pay Index shows that for the first time since September 2009, growth in the annual rate of take home pay in the private sector stands higher than the annual rate of inflation.
The VocaLink FTSE 350 Take Home Pay Index rises to 3.1% during the three months to July. This is up from 2.7% during the three months to June and represents the highest growth the Index has seen in the last 12 months.
In contrast, the VocaLink Manufacturing Index falls to 3.1% for the three months to July, down from a previous reading of 4.5%. This comes as latest data from the Office for National Statistics shows manufacturing output falling at a quarter-on-quarter rate of 1.4% in quarter 2 2012. Weak industrial growth is likely to be holding back pay increases in this sector.
The VocaLink Services Index experiences its fourth consecutive increase in annual take home pay growth, standing at 3.1% for the three months to July. The services sector has been less badly hit by the current economic downturn than other sectors, with output falling by just 0.1% in quarter 2, after rising in the previous quarter.
“The fact that take home pay growth in the private sector is now above the annual rate of inflation for the first time in nearly three years is positive news," David Yates, Chief Executive Officer at VocaLink, said.
"After the recent highs of 5.2% inflation in September 2011, to see the consumer price index at 2.4% is a welcome relief. With take home pay growth now above the rate of inflation in all but one of the indices, the reduced financial burden on the consumer has the potential to be good news for the British economy.”
Douglas McWilliams, Chief Executive of economics consultancy, Cebr, said: “The continuing falls in the consumer price index are certainly positive and getting closer to the Bank of England’s 2% target. While the employment situation in the UK remains fragile, interest rates are expected to remain low for the foreseeable future and for those in private sector employment this month’s take home pay growth of 3.1% should be regarded as good news."
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