14 October 2008

INFLATION RATE FACING THE ELDERLY HITS A SIX-YEAR HIGH OF 7.8%

  • Inflation rate facing the over 75 year olds jumped to 7.8% in September, the highest level in Alliance Trust Research Centre’s six year study and 50% higher than the official rate of inflation of 5.2%.
  • Gas prices have increased almost 50% over the last year and electricity prices have risen 30%, hitting the elderly the hardest as the winter months approach. 
  • Under 30s are still the only age group to face an inflation rate lower than the official rate.
  • Research Centre says that the elderly continue to be hit disproportionately harder than younger age groups due to rising gas and electricity prices.

 

Alliance Trust’s ongoing monthly study of age related inflation has found that the over 75 year olds continue to be hit the hardest by rising inflation, and the pain is getting worse. This age group saw their inflation rate jump from 7.0% to 7.8% in September. The inflation rates facing all other age groups increased by a smaller margin in September but now all face an inflation rate of 5% or higher.   

 

Age Group

Inflation Rate

Under 30

5.0%

30-49 Year Olds

5.4%

50-64 Year Olds

6.0%

65-74 Year Olds

6.7%

75 and Over

7.8%

 

Gas prices have increased almost 50% over the last year and electricity prices have risen by 30%, hitting the over 75 year olds the hardest. This age group spends almost 7% of their budget on electricity and gas bills whereas the under 30 households spend just 3% on such utilities.

 

Over 75 year olds also continue to suffer from high food prices. Although food price inflation eased in September, prices are still almost 13% higher than a year ago. This hits the over 75 year old age group hardest as they allocate 16% of their household budget to food compared to less than 9% for the under 30 households. Inflation for many basic food items is even higher than this. Bread & cereal prices have increased almost 16% and meat prices have gained 19% over the last year.  

 

Although everyone is facing a high rate of inflation at this time, younger generations continue to benefit from the fact that they spend a higher proportion of their incomes on discretionary items, such as audio visual goods, clothing and footwear, where prices continue to fall. Over the last year, the prices of audio-visual goods have fallen by 12% and clothing prices have dropped by 7%. The under 30s spend 6% of their budget on clothing, which is almost double the amount allocated by the over 75 year olds. The inflation rate facing the under 30s is the lowest of all the age groups at 5.0% and is in fact lower than the official rate of 5.2%.

 

Spending Weights

 

Age Group

Food

Electricity

Gas

Petrol

Under 30

8.5%

1.6%

1.4%

4.2%

30-49 Year Olds

10.6%

1.8%

1.6%

5.1%

50-64 Year Olds

11.6%

2.0%

1.9%

5.1%

65-74 Year Olds

13.8%

2.5%

2.5%

4.5%

75 and Over

16.3%

3.4%

3.5%

2.5%

Note: This table shows the spending patterns of different age groups across different spending categories.

 

 

Shona Dobbie, Head of the Alliance Trust Research Centre said, "We are seeing the highest levels of inflation in the history of our six year study. The over 75s are facing a rate of inflation 50% higher than the official rate of inflation, which is currently 5.2%, mainly due to rising utilities costs which have soared over the past year. The recent gas and electricity price hikes hit the elderly the hardest because they spend a higher proportion of their household budget on such services.  This current spike in inflation is particularly worrying for elderly consumers especially as we enter the winter months. Higher gas and electricity prices leave these households with less money to spend elsewhere. However, oil prices have fallen recently and this means that we could see petrol price inflation easing in the coming months.”  

 

Food price inflation is still high at almost 13% with some basic foods, such as bread & cereals and meat displaying inflation levels even higher than this.  More positively, we are seeing some early signs that food price inflation has peaked which could provide some welcome relief to stretched consumers. Unfortunately, even when inflationary forces begin to ease, we expect actual price levels for basic goods and services to remain high which will continue to weigh on consumer confidence and spending.”

 

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 / Anna Moulds

Alliance Trust                                                               Lansons Communications

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

Email  jane.holligan@alliancetrust.co.uk                    Email  alliancetrust@lansons.com

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, a FTSE 100 company and 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.

 

4.       Inflation and Age chart illustrated below.

 

 

Inflation and Age (January 2006 to September 2008)