Inflation cheer muted as bosses keep pay rises on hold

Bosses turned the screw on pay during January and kept consumer finances under the cosh despite falling inflation, financial information group Markit warned today.

Its latest household finance index signalled a fresh crackdown on private-sector pay deals last month, muting the cheer over easing pressure on the cost of living. Official figures last week showed inflation hitting a three-year low of 4.2 per cent in December with even bigger falls expected this month.

The survey revealed the fastest deterioration in incomes in the survey's history last month as its index fell from 46.9 to 46.1, well below the 50 mark signalling no change. Employees in the private sector suffered most in the month.

The health of household finances is still worsening overall, although the pace of decline is the slowest since December 2010 thanks to lower inflation, Markit added. But senior economist Tim Moore warned there was "little room for manoeuvre" for households in 2012.

However, hopes for a private sector jobs boost may finally come into fruition this year after research published today revealed a third of British senior executives are planning to recruit between now and May.

The Government's latest employment figures showed in the last three months of 2011, 67000 public sector jobs were lost and just 5000 private sector jobs were created.

But that pace could accelerate after almost three quarters – or 72 per cent – of bosses reported feeling more confident about their firms' growth prospects at present than this time last year, according to a major survey of 600 British businesses commissioned by recruiter Robert Half.

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