Friday, October 24, 2014

Wot Recovery? (2)

A report casts doubt on forecasts that a six-year decline in living standards is about to end. Britain’s private sector employers plan to restrict pay awards to 2% over the next year. Only sectors such as housebuilding and engineering, where skills shortages have caused recruitment problems, are likely to see a pay rise of more than 3%, the report found. It was based on interviews with 262 employers.

It said: “The majority of employees are unlikely to receive a pay rise that matches inflation. RPI inflation is forecast to be higher than 3% over the course of 2015, and only one pay award in three is expected to match or exceed this figure.”

Although pay rises next year could exceed the consumer prices index, which stood at 1.2% in September, they may fail to beat the generally stronger retail prices index (RPI), the measure of inflation more commonly used in wage negotiations, which showed an annual rate of 2.3% in the same month.

A weak manufacturing survey from the CBI reinforced the sense that Britain’s economic recovery is losing steam. A sluggish eurozone economy and a stronger pound pulled export orders lower in the three months to October for the first time in 18 months, the business lobby group said, frustrating government ambitions for a big push in UK exports. Manufacturing output and orders overall grew at the slowest pace in a year. Rain Newton-Smith, director of economics at the business lobby group, said: “It’s disappointing that a sluggish exports market has taken some of the steam out of manufacturing growth, which was going from strength to strength throughout most of this year. “Global political instability, mounting concerns about weakness in the eurozone, and recent rises in sterling are all weighing on export demand.”

Subdued retail sales in September and the first fall in export orders for 18 months added to the gathering gloom over the state of the economy amid expectations that the first official estimate of third-quarter growth morning will show Britain’s recovery is slowing. Economists are forecasting 0.7% expansion between July and September, a slowdown from more robust 0.9% growth in the second quarter. Howard Archer, chief UK economist at IHS Global Insight, said: “It does look like consumers have reined in their spending to some degree after splashing out at a strong rate overall through the first half of the year. This is not that surprising given the overall pressure coming on consumers’ purchasing power from prolonged very weak earnings growth.”

The protracted squeeze on pay packets since the financial crisis means the average worker in Britain is already £5,000 a year worse off than in 2008, a leading labour market expert, Prof Paul Gregg of Bath University, warned this month.

The TUC’s general secretary, Frances O’Grady, said: “This looks like pay misery without end...”

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