It increased by 2 per cent in 1995-96, slightly less than expected at the time of the Budget. The projections for 1996-97 were also revised down in the Summer Economic Forecast. The GDP deflator is the index used to express public expenditure in real terms and is therefore an indicator of particular relevance to the setting of provision in the public expenditure survey. Whole economy average earnings growth has been broadly stable at between 3-4 per cent for more than three years, despite sustained economic growth and a steady fall in unemployment. It has risen from 3 per cent throughout the second half of 1995 to 3 per cent and has stayed at that level since February 1996.
Earnings growth remains low by historic standards.
This supports the view in the Summer Economic Forecast that there are still few signs of wage pressures. The increase in earnings followed a slight rise in wage settlements since 1994 but since the beginning of this year the evidence is that settlements have levelled off and there are signs of a fall on some measures. Settlements data include the following. Their annual figures for the year to June 1996 show pay settlements averaging 3.3 per cent for the whole economy and 3.0 per cent for the public sector. Settlements data collected by the Office of Manpower Economics to inform some central pay negotiations show a median of 3.5 per cent for private sector non-manual settlements for the year to June 1996.