14 August 2007

LATEST FIGURES SHOW SHARP FALLS IN INFLATION FOR ALL AGE GROUPS

The Alliance Trust Research Centre's monthly 'Age and Inflation' alert shows the rate of inflation facing all age groups fell during July as falling food and furniture prices reduced overall inflation. For the over-75s the decline was significant, dropping from 3.1% in June to 2.2% in July, but the rate of inflation facing this age group remains the highest overall. Although there was a sharp decline in the official rate of headline inflation to 1.9% in July from 2.4% the previous month, Alliance Trust’s monthly inflation alert shows that the inflation rate facing the over-75s is still 16% higher than the headline rate.

The headline findings, based on the updated spending patterns of different age groups and analysis of official July inflation figures are:

· Inflation rates for all age groups declined for a fourth consecutive month as food and furniture prices fell sharply. Furniture price falls reflected heavy discounting by retailers.

· Inflation for the over-75s remains the highest of all age groups, at 2.2%, that's 16% higher than headline inflation of 1.9%.

· The respite for the elderly from falling food prices may be short-lived as recent flooding in the UK, and the heat-wave in Europe, could result in higher food prices over the next few months. This would have the biggest impact on the oldest age group.

· The youngest age group, the under-30s, saw the smallest decline in inflation as they still face the burden of higher rents and education costs.

· Gas and electricity price inflation retreated from the record highs recorded last year. Gas price inflation is now running at less than 2% while electricity price inflation is less than 4%.

Inflation and Age (Jan 2004 to July 2007)

Alliance Trust's age-related inflation study has been updated using official price data for July. Our results show that the rate of inflation facing every identified age group continued to decline, as electricity and gas price inflation decreased and food, clothing and furniture prices fell sharply during the month. Furniture prices fell by over 10% during July, reflecting heavy discounting by retailers. Clothing prices fell 4.5%, and audio visual product prices fell by almost 3%. All of this helped to pull overall inflation downwards. However, the impact of inflation continued to differ for different age groups. The inflation rate facing the over-75s remains highest, at 2.2%, and the youngest age group, the under-30s, are also facing an inflation rate which is higher than the headline CPI, due to the ongoing burden of rent and education costs.

Food prices fell 2% over the month

Shona Dobbie, Head of the Alliance Trust Research Centre said, "Even though monthly inflation has fallen, our four-year study continues to highlight the extent to which the UK's elderly are the group hit hardest by current high levels of inflation. Despite a drop in headline inflation to just 1.9% this month, the elderly still face a higher rate of inflation of 2.2%. While it is heartening to see some reduction in the disproportionate effect of inflation on the elderly in July, we have to remember that more than four years of higher-than-average inflation has eaten into pensioners’ budgets and left them struggling to pay rising bills. These are continuing to go up, albeit at a slower pace”.

“Unfortunately the effects of lower food prices, which have helped bring elderly inflation closer to the average, could be short-lived. Food price inflation fell back significantly during July, as fruit prices fell by almost 7% over the month and vegetable prices fell by 3%. However, we expect the recent flooding in England and the heat-wave experienced in Europe to have hit food crops and prices for seasonal fruit and vegetables will probably rise over the next few months. This would have the biggest impact on the inflation rate facing the over-75s, who spend a much higher proportion of their household budgets on these items.”

Alliance Trust’s full latest report on ‘Inflation and Age’ is available on www.alliancetrust.co.uk

You can obtain a copy of the report by emailing contact@alliancetrust.co.uk or phoning 08000 326323.

Contacts

Jane Holligan, Media Relations Manager Emma Wylie/ Anna Schirmer

Alliance Trust Lansons Communications

Tel +44 (0)1382 306064 Tel +44 (0)20 7566 9727

Mobile 07745 783212 Email alliancetrust@lansons.com

Email jane.holligan@alliancetrust.co.uk

Web www.alliancetrust.co.uk

Notes to editors

1. Alliance Trust is an international investment and financial services group. It is headed by Alliance Trust PLC, the largest generalist investment trust company listed on the London Stock Exchange. Through its subsidiaries, Alliance Trust offers investment dealing, self-invested personal pensions and a choice of investment wrappers.

2. The Research Centre is part of Alliance Trust and was formed to carry out economic and social analysis to deepen our understanding of economies, markets and socio-economic issues.

3. Photographs of Shona Dobbie are available.