Average pay increase hits 15-month high of 3.2%

Wage Growth looks set for an inflationary surge this year, according to figures published by a leading pay specialist today showing all deals so far this year had come in above 3 per cent.

Wage Growth looks set for an inflationary surge this year, according to figures published by a leading pay specialist today showing all deals so far this year had come in above 3 per cent.

Incomes Data Services (IDS) said the average pay settlement rose to a 15-month high of 3.2 per cent in January, which is seen as a benchmark month for negotiators.

The findings came asbusiness surveys pointed to a rise in confidence and activity in the first few weeks of 2005, adding to speculation that the next move in interest rates will be up.

IDS said the spike in pay awards was driven by the rise in headline inflation, which hit a six-year peak of 3.5 per cent in December. The rise was particularly strong in manufacturing and production where the average pay rise was 3.4 per cent, compared with 3.0 per cent last spring.

The survey is likely to ring alarm bells at the Bank of England, as its monetary policy targets a different inflation mea- sure - currently at 1.6 per cent - when it sets interest rates.