Industry update December
Posted on 11 December 2012
Inflation
October 2012 saw the Consumer Prices Index (CPI) rise to 2.7%, up from 2.2% in September. The main contributor to this rise being university tuition fees, with food and non-alcoholic beverages the second largest. Last month also saw a rise in the Retail Prices Index (RPI), standing at 3.2% up from 2.6% in September. Experts are also predicting further bad news, expecting that inflation may break through the 3% level. On the brighter side, the big squeeze on consumer spending is not as severe as it was this time last year (with inflation over the 5% level), but experts are saying that it will still be enough to keep consumer spending down going into 2013.
Unemployment
Reports show the rate of UK unemployment continuing to fall. The ONS Labour Market Statistics Report (November 2012) reveals that the unemployment rate in the three months to September 2012 stood at 7.8% of the economically active population, down 0.2% on the previous quarter. Numbers of unemployed people in the UK fell by 49,000 to 2.51 million, the lowest this figure has been in over a year. The ONS reports that the fall is mainly due to a decline in youth unemployment. Despite the UK being in a double-dip recession experts have remarked how well the labour market has performed over the past year and, when we compare these latest figures to the EU’s unemployment rate of 10.6%, the UK appears to be doing reasonably well.
Growth
The UK economy has officially emerged from recession in this quarter (July to September 2012) helped by the Olympic Games. Gross domestic product figures show that the economy grew by 1.0%. This boost was helped significantly by the sale of Olympic tickets which contributed 0.2% to the overall growth figure. The service sector has also grown by an estimated 1.3% in the third quarter of 2012, again with help from the Olympics. The UK growth figures have gone beyond experts’ predictions of an increase of 0.6% in the three months to September 2012. Welcome news as the economy has been in recession for the last two quarters with the UK heading for a triple-dip recession earlier this year. The ONS reports that aside from Olympic ticket sales it was hard to pinpoint other influences on the growth figures, but it did suggest that increased leisure activity such as spending in restaurants and hotels contributed. The latest figures seem more enhanced compared with the previous quarter (the three months to June) as there was an extra bank holiday for the Diamond Jubilee and remarkably bad weather for the time of year; two factors which always negatively affect economic growth. Unfortunately, experts suggest that the rise in official growth figures will be short-lived as the Olympic/Jubilee boost was a one-off. The British Chamber of Commerce says that the latest growth figures need to be in context – David Kern, Chief Economist at the BCC said, "The 1% GDP figure for the third quarter is affected by distortions in the second quarter due to the Jubilee and Olympic ticket sales. Compared to a year earlier, the figures show that the economy is stagnant."
Pay Settlements
Xpert HR’s November 2012 Pay Trends Report reveals median basic pay awards across the whole UK economy stood at 1.8% in the three months to the end of October 2012. This is the second successive fall and brings them down to their lowest level since June 2010. As a result of government cuts, median pay awards in the public sector remain at zero. In the private sector increases have also reduced by 0.3% to 2%. On a more positive note, figures suggest that there has only been a small decrease over the past year; awards in the year to the end of October 2012 stand at a median of 2.4% down only 0.1% from the figure to the end of September. As the rate of inflation has increased to 3.2% in October 2012, the gap between pay awards and inflation has increased to 1.4%. Pay freezes are also on the up, having risen from 15.4% of pay deals last month to 22.5% of deals in the three months to the end of October. There continues to be a large gap between the public and private sectors – over the past three months, half of all public sector pay settlements ended up in a pay freeze compared with 18.6% in the private sector.
Gender Pay Gap
A recent report published by the ONS (2012 Annual Survey of Hours and Earnings) reveals that the pay gap between men and women has decreased to 9.6% from 10.5% in 2011, based on median gross hourly earnings for full time employees. For men full time gross weekly earnings were £546, up 1.4% on last year and for women were £449, up 1.9%. Despite this narrowing of the gender pay gap, experts suggest that at the current rate it will take almost the next thirty years to close the pay gap between men and women completely. Economists have said that the narrowing gap is explainable simply by men’s full time earnings rising at a slower pace than women’s. Others suggest that the decreased difference may be due to cultural shifts.
