The number of awards at 3pc or above has been rising and this has emerged as a key figure in pay setting. However, pay awards are still trailing some way behind inflation. This gap looks set to continue if inflation continues to rise."
Evidence of rapidly rising wages will concern the Bank of England, which is keen to prevent high current levels of inflation becoming embedded into wages and so fuelling future price rises. Manufacturing is already pushing through its cost increases, the CIPS report showed.
Rob Dobson, senior economist at Markit and report author, said: "The latest data also confirm that input cost and output price inflationary pressures remain elevated, which may raise a further eyebrow amongst the members of the Bank."
However, sterling strengthened 0.4 cents to $1.6309 on the back of the better-than-expected manufacturing data. The CIPS report showed that growth rates in output and new orders dropped slightly from their 16-year high in January, but new export orders rose for the fifth month in a row.
David Noble, chief executive of CIPS, added: "Strong growth in demand across the manufacturing sector continued to put breath in the sails of the UK economy in February."
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