18 December 2007
INFLATION
RISES FOR ALL AGE GROUPS AS FOOD PRICES SOAR
Although the official headline
rate of inflation remained unchanged at 2.1% in November, Alliance Trust’s
independent study found that the inflation rate facing all five of its identified
age groups increased over the month. Inflation continues to hit the over 75s
and the under 30s hardest – these two groups have both seen their inflation
rate increase to 2.6%. Alliance Trust Research
Centre’s headline findings, based on the updated spending patterns of different
age groups and analysis of official November inflation figures are:
·
Inflation
increased across all age groups over the month. This was due to an acceleration
in both food and fuel prices. Food price inflation remained at a six-month high
of 5.1%.
·
The
under 30s face the same inflation rate as the over 75s. Both age groups face an
inflation rate of 2.6%, which is 24% higher than the official headline rate of
2.1%.
·
Rising
food prices continue to weigh on the elderly, who spend a large proportion of
their monthly budget on food. Prices of dairy products, and oils and fats, have
all increased by around 14% over the last year, while bread and cereal prices
are up 6%.
·
The
youngest age group, the
under 30s, have experienced a sharp rise in inflation due to rising prices for food,
rent and education. Education costs are up more than 13% over the last year.
·
The
rising oil price has pushed petrol prices higher. Fuel price inflation is now at
a 26 month high of 17%.
Alliance
Trust Research Centre’s age-related inflation
study has been updated using official price data for November. The official
rate of headline inflation remained unchanged at 2.1% during the month, but our
study shows that all five of our identified age groups have seen their
inflation rate increase over the month, to levels which are higher than the
official headline. This is particularly severe for the oldest and youngest age
groups. Both the over 75s and the under 30s are facing an inflation rate of 2.6%,
which is 24% higher than the official headline rate. Although
temporary declines in gas and electricity price inflation have helped to reduce
some of the energy cost pressures facing the elderly, this group is being hit particularly
hard by higher food and petrol prices. Food price inflation remains at a six
month high of more than 5%, driven by high price growth for many basic products,
such as milk, butter, cereals and bread.
The inflation rate facing the under 30s has
increased for the fourth consecutive month and also stands at 2.6%. This
reflects the fact that young households are not only hit hard by the impact of
higher food prices, but face additional pressures from higher rents and
education costs. Education costs have risen by more than 13% over the last year.
Inflation and Age (Jan 2004 to
November 2007)
Source – ONS, In-House Analysis
Shona Dobbie, Head of the Alliance Trust Research
Centre said, "Our study shows the
extent to which the impact of inflation can differ from what the government’s
headline figure suggests, with big variations across different age groups. Since
our study began in 2003, the elderly have
consistently suffered the highest levels of inflation. Over the past few
months, they have been matched by the young. Although
the official headline rate of inflation remained unchanged at 2.1% this month, the
rate of inflation facing both the elderly and the young has increased, to a
much higher level of 2.6%. Pensioners
have now been suffering higher-than-average inflation for almost five years,
and this has been steadily eating into their budgets. Unfortunately, we suspect
that this situation could continue for some time. Older households are
particularly vulnerable to the impact of rising prices for basic goods such as
food and household energy. We are also concerned about the more recent increase
in the rate of inflation facing young adults, largely due to higher rents and
education costs, as well as the costs of basic goods.”
“Although the official headline rate of
inflation remained unchanged this month, inflationary pressures are still
strong for many basic goods. The high oil price has pushed fuel prices to a 26
month high, while price inflation for milk, cheese and eggs, and bread and
cereals, are both at their highest levels on record. Rising food prices have
the biggest impact on the inflation rate facing the over 75s since this age
group spends a much higher proportion of their household budgets on basic items
such as these.”
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.
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.