VocaLink’s take home pay index increases despite dramatic fall in the manufacturing sector
- Take home pay growth increased to 3.4% in February, according to VocaLink
- This increase was driven by the service sector which rose by 1.2% in February
- But the manufacturing sector saw a unexpected fall in take home pay growth of 0.6%
5 March 2008 – This month’s VocaLink take home pay index rose to 3.4% despite a dramatic fall in take home pay growth in the manufacturing sector. This follows on from last month’s index which reported the lowest recorded figure since 2006. However even with this increase, the overall level of pay growth remains well below the 4.5% The Bank of England considers to be consistent with stable inflation.
The recovery was led by the services sector which saw an increase from 2.2% in January to 3.5% in February. The low January figure was likely to have been the result of poorer performance in many key sectors such as finance, damaging bonuses which boost take home pay.
Conversely, the manufacturing sub sector index saw a substantial decrease in pay levels falling from 3.5% in January to 2.9% in February. This decline follows the poor performance in the final quarter of 2007 when manufacturing output failed to expand.
Richard Cooper, head of brand and communications at VocaLink said, “The 0.6% fall in pay growth reflected in the manufacturing sub index is surprising given that last month’s figures were the strongest increase in wage levels since August 2007. It was suggested that the manufacturing sector would continue to see further growth, but this month’s figure shows a downward trend which further demonstrates the uncertainty of current economic conditions.”
Douglas McWilliams, chief executive of cebr, the economics consultancy which analyses the take home pay index for VocaLink, said “The modest level of the VocaLink take home pay index in recent months shows that rising price inflation faced by consumers has not led to an acceleration in wage growth and possible wage-price spiral. However, The Bank of England will have more room to act as 2008 progresses and we expect interest rates to be cut by a further 75 basis points to 4.5% by the end of the year”.
Follow this link to read the full statistical report.