18 November 2008

DESPITE DROP IN AVERAGE INFLATION, ELDERLY STILL FACE RATE OF 7.1%  

  • Inflation rate facing the over 75 year olds was 7.1% in October, 58% higher than the official rate of inflation of 4.5%.
  • The decline in the rate of inflation facing the elderly was the smallest among all five age groups.
  • Gas prices have increased by more than 50% over the last year and electricity prices have risen by more than 30%, threatening to hit the elderly hard during the winter months.
  • Both the under 30s and the 30-49 year age groups are facing inflation rates which are lower than the official rate of 4.5%.

 

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. Even though headline inflation has dropped to 4.5%, this age group saw their inflation rate decline from 7.8% to 7.1% in October. This was the smallest decline among all five age groups and leaves the elderly facing a rate of inflation which is 58% higher than the headline rate of 4.5%, which was down from 5.2% in the previous month.

 

Age Group

Inflation Rate

Under 30

4.2%

30-49 Year Olds

4.4%

50-64 Year Olds

5.0%

65-74 Year Olds

5.8%

75 and Over

7.1%

 

Gas prices have increased more than 50% over the last year and electricity prices have risen by more than 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 October, prices are still 11% 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, and meat prices, have all increased by 14% 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 almost 14% and clothing prices have dropped by more than 7%, reflecting heavy discounting by the major retailers. 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 4.2% and is lower than the official rate of 4.5%.

 

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, "While it is good to see headline inflation fall back sharply this month, we remain concerned about the high level of inflation which the older age groups still face. The rate of inflation facing the over 75s has been reduced, but only to 7.1%, which is still 58% higher than the official rate of inflation. This highlights the extent to which the elderly are suffering disproportionately from rising utility 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 high level of inflation is worrying for elderly consumers now that winter is almost here. High gas and electricity prices, and food prices, leave elderly households with less money to spend elsewhere.”

 

We are seeing signs that food price inflation has peaked, but this is still high at almost 11%, and some basic foods, such as bread & cereals and meat are displaying inflation levels closer to 14%. Unfortunately, even now that inflationary forces are easing, the actual price levels for basic goods and services remain high and will continue to weigh on consumer confidence and spending, particularly among the elderly.”

 

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 PLC is a self-managed investment company with investment trust status. A FTSE-100 company, it is the largest generalist UK investment trust by assets listed on the London Stock Exchange.

 

  1. 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.

 

  1. Photographs of Shona Dobbie are available.

 

  1. Inflation and age chart is shown below.

 

 

Inflation and Age (January 2006 to October 2008)

Source: In-house