May's engineering pay settlements fell to the lowest monthly figure for more than two years.
The average settlement for the three months to May 2001 was 2.6%, compared to 2.9% in the previous three month period.
During the quarter, pay freezes increased to one-in-six of all reported settlements. In May alone, more than a third of settlements were freezes.
According to the Engineeing Employers Federation, which collects the figures, the reduction reflects the deteriorating trading conditions facing industry.
David Yeandle, deputy director of employment policy for the EEF, said: "This sharp fall in pay settlements is a clear indicator of how rapidly manufacturing conditions are now deteriorating.
"It reinforces our view that the Monetary Policy Committee will have to give very serious consideration to making a further cut in interest rates in the near future."
The June pay bulletin analyses 349 pay settlements, affecting 43304 people.
engineering pay settlements
months to May 2001