Spending squeezed by below-inflation pay rises The typical pay rise given to private sector workers in the three months to March was 3pc - below the cost of living which stood at 3.5pc in March, based on the Consumer Prices Index. The figures from pay consultancy Incomes Data Services (IDS), also revealed 8pc of all "deals" were pay freezes, primarily in the manufacturing, construction and not-for-profit sectors. Ken Mulkearn, editor of IDS Pay Report, said: "While pay settlements are showing more strongly than last year, the median remains below inflation for the moment. The failure of wage rises to keep up with increases in the cost of living is placing downward pressure on household incomes, alongside other factors, and this in turn is having an effect on consumer spending. As a result, what happens to inflation will be extremely important for decisions on pay over the coming months. And in a period when the spotlight is firmly on the figures for economic growth, pay outcomes will also have significance for the economy as a whole. IDS said the 3pc typical increase was unchanged in the first quarter from the three months to the end of February, although slightly more employers were starting to award rises of between 3pc-4pc, the study showed. A fifth of pay increases stood at 4pc or higher. Banks and retailers typically paid below the 3pc benchmark, while transport, oil and media employers had generally been dishing out above-average increases. However, lucrative deals are unlikely to remain in the months ahead, IDS said, with provisional data for the three months to April already showing fewer deals at the top end. Private sector pay rises are expected to fall to 2.9pc between February and April, 0.1pc down on the first quarter, IDS said.