16 October 2007

INFLATION RISES FOR ALL AGE GROUPS – BUT YOUNGEST AND OLDEST STILL HIT HARDEST

Although the official rate of inflation remained unchanged at 1.8% in September, our independent study reports a slight increase in the rate of inflation facing every single age group. Although the 65-74 year olds suffered the biggest increase in inflation this month, it is still the over 75s and the under 30s who face the highest rates of inflation. The inflation rate facing the elderly has been running consistently above the official headline rate throughout Alliance Trust Research Centre’s four-year study of age and inflation.

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

• Inflation increased across all age groups over the month, despite further declines in gas and electricity price inflation. Utility and fuel price inflation is now at its lowest since March 2001.

• The over 75s continue to suffer the highest rate of inflation, at 2.2%, which is 22% higher than headline inflation of 1.8%.
• The elderly, who spend a large proportion of their monthly budget on food, are expected to experience further pressures from rising food prices over the next few months. Food price inflation increased from 2.8% to 3.8% in September.
• The youngest age group, the under 30s, face the second highest rate of inflation, due to the ongoing burden of higher rents and education costs.
• Gas and electricity price inflation continue to retreat from the record highs recorded last year. Electricity price inflation is now just over 1% and gas prices have actually fallen 4% compared to the same time last year. Gas price growth has now been negative for two months.

Alliance Trust Research Centre’s age-related inflation study has been updated using official price data for September. Our results show that, although the official rate of headline inflation remained unchanged at 1.8% in September, the inflation rate facing every age group edged slightly higher over the month. The rate of inflation facing the over 75s is now 22% higher than the headline rate. Although declines in gas and electricity price inflation are helping to reduce energy cost pressures on the elderly, food prices continue to rise. Food price inflation increased from below 3% to just under 4%, driven by high price growth for many basic products, such as milk, vegetables and butter.

The inflation rate facing the under 30s now stands at 2.1%, which is 17% higher than the official headline rate. This reflects the fact that young households are also suffering the impact of higher food prices, and face additional pressures from higher rents and education costs. Education costs have risen by 14% over the last year.

Inflation and Age (Jan 2004 to September 2007)

Shona Dobbie, Head of the Alliance Trust Research Centre said, "Our study continues to highlight the extent to which inflation hits different age groups. Throughout the entire course of our four year study, the elderly have consistently suffered the highest levels of inflation. Although the official headline rate of inflation remained unchanged at 1.8% this month, our study shows that the rate of inflation facing the elderly has increased to a much higher rate of inflation of 2.2%. More than four years of higher-than-average inflation has eaten into pensioners’ budgets and left them struggling to pay higher bills. We are also becoming concerned about the more recent trend of young adults also facing inflation which is significantly higher than the headline rate, largely due to higher rents and education costs, as well as the costs of basic goods.”

“Looking forward, we would not be surprised to see inflation pressures start to rise once more. The oil price has now moved to a new record level and this could push petrol and transport costs higher. Food price inflation spiked higher in September, and there could be more to come. The recent flooding in England and the heat-wave experienced in Europe has had an impact on some food crops and prices will probably rise further 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          Anna Schirmer/ Stuart Lerman/ Anna Moulds

Alliance Trust                                                   Lansons Communications

Tel  +44 (0)1382 306064                                   Tel  +44 (0)20 7490 8828

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.