The VocaLink Take Home Pay Index rose by 0.7% to show 2.0% annual wage growth in August, the greatest one-month increase since February 2007. The figures are now back to the same levels seen in March this year, when the VocaLink Take Home Pay Index was in the midst of a six-month cycle of steadily falling wage growth. Economists see this turnaround of wage growth as an indication that the UK may be pulling out of recession.

Leading the rise was the services sector with the sub-index increasing sharply by 0.9% to 2.8% wage growth in August. It is now clear that the collapse of the financial services bonus payouts, which are traditionally made in the first few months of the year, was a significant contributor to the steady six month fall of the VocaLink Take Home Pay Index which bottomed out in May at 1.1% annual pay growth.

However, in contrast to the services sector, the manufacturing sector sub-index remained weak with a low 0.3% increase to just 0.8% pay growth. This is the second lowest recorded annual wage growth for the manufacturing sector and underlines the difficulties manufacturers are still facing, resulting in ongoing pay freezes and wage cuts.

Mark Chapman, marketing director at VocaLink, said: "While the VocaLink Take Home Index has shown its greatest rise in 18 months, overall 2.0% is still low and highlights the fact that underlying earnings growth is generally weak. This is exacerbated by the extremely weak manufacturing wage growth which, if it carries on as expected, will continue to dampen down overall pay growth figures."

Douglas McWilliams, chief executive of economics consultancy, cebr, said: "Although the VocaLink Take Home Index shows an increase in wage growth, these weak levels will have major implications for inflation and inflation expectations. As such we expect the Bank of England to be able to continue its unprecedented quantitative easing policy. We do not expect interest rates to rise nor quantitative easing to be unwound until late 2010."

VocaLink processes over 90% of UK salaries and the VocaLink Take Home Pay Index, established in 2004, provides the most timely and accurate disposable income data available in the UK. It is based on actual payments made to employees on a three-month moving average compared with the same Continuation measure a year earlier. It is affected by changes in tax rates, National Insurance and other employer payments or deductions.