15 January 2008
HEADLINE
INFLATION REMAINS UNCHANGED DESPITE HIGHER FOOD AND FUEL PRICES
Alliance Trust’s independent
study has found that the inflation rates facing all five of its identified age
groups remained unchanged over the month. Inflation continues to hit the over 75s
and the under 30s hardest – these two groups have the highest inflation rate at
2.6%. Alliance Trust Research
Centre’s headline findings, based on the updated spending patterns of different
age groups and analysis of official December inflation figures are:
·
In
December, there was no change in the rates of inflation facing our five
identified age groups. Ongoing declines in utility prices helped to compensate
for the combination of higher food and fuel prices. Food
price inflation is at an 8 month high of 5.9%.
·
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 have increased by 15%
over the last year, which is more than seven times the headline rate of
inflation. Bread prices have increased by almost 8% and vegetable prices are up
7%.
·
The
youngest age group, the
under 30s, continue to face a relatively high rate of inflation. This is due to
the combination of rising prices for food, rent and education. Education costs have
risen by more than 13% over the last year.
·
The
rising oil price has pushed petrol prices higher. Fuel price inflation is running
at close to 17%, which is eight times the official headline rate of inflation.
Alliance
Trust Research Centre’s age-related inflation
study has been updated using official price data for December. The official
rate of headline inflation remained unchanged at 2.1% during the month, and our
study shows that all five of our identified age groups have also seen no change
to their inflation rate over the month. However, all five of our identified age
groups are facing a rate of inflation which is higher than the official
headline. This is particularly severe for the oldest and youngest age groups.
Both the over 75s and the under 30s continue to face 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 continues to
be hit particularly hard by higher food and petrol prices. Food price inflation
is now at an 8 month high of close to 6%, driven by high price growth for basic
products, such as milk, butter, cereals, bread and vegetables.
The inflation rate facing the under 30s has remained
at a relatively high level of 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
December 2007)
Source – ONS, In-House Analysis
Shona Dobbie, Head of the Alliance Trust Research
Centre said, "Our study continues to
highlight the extent to which the impact of inflation can differ from the official
headline figure. In particular, we
repeatedly identify big variations in the inflation rates applying across
different age groups, reflecting the different spending patterns of each group.
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. This month we have found that both age
groups continue to face a rate of inflation of 2.6%, which is considerably
higher than the official headline rate of 2.1%. Our study now shows that pensioners
have been suffering higher-than-average inflation for 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,
and these are the categories where we are seeing most pressure at this time. We
are also concerned about the high rate of inflation facing young adults, which
is 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 which we all have to buy on a regular basis. This
makes inflation feel much higher than the official level, and leaves less money
left over to spend on the more discretionary items, such as clothing and
audio-visual goods where prices continue to fall. Increases in basic goods
prices have the biggest impact on the over 75s since this age group spends a
much higher proportion of their household budgets on basic items such as these.
Unfortunately, we see no signs of these pressures easing in the near future.”
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.