19 May 2009
INFLATION FACING ELDERLY DROPS SHARPLY
TO 3.9% BUT GAP WIDENS BETWEEN OLD AND YOUNG
- Latest figures from
- The gap between inflation
rates facing young and old has widened with the elderly facing an
inflation rate 77% higher than the under 30 year olds, compared with 70%
last month
- Though
all groups are benefiting from reductions in gas, electricity, petrol and
food price inflation, these benefits are coming through more slowly for
the elderly, with the cost of basic goods and services remaining high
- Inflation
rates across all age groups are already lower than at this time last year,
and are expected to fall even further as pricing pressures on utilities
and food continue to ease and as lower demand impedes companies’ pricing
power.
This month’s official inflation
report showed that the headline rate of inflation fell to 2.3%. Although Alliance
Trust’s ongoing monthly study of age related inflation reveals a drop in the
inflation rate facing all age groups, it is the two oldest age groups which
have benefited most this month. This is because these groups spend the highest proportion
of their budgets on basic goods and services, such as utilities, food and
petrol; where price inflation has fallen this month. However, although their
rate of inflation has fallen, the over 75 year olds continue to face an
inflation rate which is much higher than the official rate, at 3.9%, though down
from 4.6% the previous month. The gap between this rate of inflation and the
headline rate has widened. The over-75s face an inflation rate that is now 70% above
the headline rate and 77% higher than the inflation rate facing the under 30
year olds. The 65-74 year old age group faces a rate of inflation of 3.2%.
Shona Dobbie, Head of the
|
Age Group |
Inflation Rate |
|
Under 30 |
2.2% |
|
30-49 Year Olds |
2.3% |
|
50-64 Year Olds |
2.5% |
|
65-74 Year Olds |
3.2% |
|
75 and Over |
3.9% |
Although utility price inflation
has fallen sharply this month, to a rate of almost 13%, this is still high.
Electricity price inflation has dropped to just over 9%, but gas price
inflation remains much higher at almost 24%. These price pressures have hit
over 75 year olds the hardest, as this age group spends more than 7% of their
budget on electricity and gas bills whereas the under 30 year olds spend just
over 3% on these services.
Over 75 year olds also suffer relatively
more whenever food prices are high. Food price inflation has dropped this
month, but it remains above 9%. This hits the over 75 year old age group most
acutely as they allocate more than 16% of their household budget to food,
compared to just 9% for under 30s. Inflation for many basic food items remains
high. Meat price inflation is more than 12%, vegetable prices have risen by more
than 11% over the last year and bread and cereal prices have gained almost 9%
In contrast, the under 30s face an
inflation rate of just 2.2%, which is lower than the official rate. This youngest
age group is currently benefiting from the fact that they spend a higher
proportion of their income on discretionary items, such as audio-visual goods,
clothing and footwear, where prices continue to fall sharply. Over the last
year, the prices of audio-visual goods have fallen by more than 13%, while
clothing prices have dropped by almost 10%. The under 30s spend almost 6% of
their budget on clothing and footwear compared to 4% allocated by the over 75
year olds.
Spending
Weights
|
Age Group |
Food |
Electricity |
Gas |
Petrol |
|
Under 30 |
9.0% |
1.8% |
1.5% |
4.3% |
|
30-49 Year Olds |
10.9% |
2.0% |
1.8% |
5.0% |
|
50-64 Year Olds |
11.6% |
2.2% |
2.0% |
5.2% |
|
65-74 Year Olds |
14.4% |
2.7% |
2.5% |
4.6% |
|
75 and Over |
16.4% |
3.7% |
3.5% |
3.2% |
Note:
This table shows the spending patterns of different age groups across different
spending categories.
Shona Dobbie added, “Inflation is in retreat, but the elderly continue to be hit hard. Gas, electricity
and food price inflation may be easing, but price increases in these areas are
still elevated and the need to cover these basic costs leaves elderly
households with much less money to spend elsewhere. Although younger age groups
are also hit by high costs for basic goods, they spend proportionately more on
discretionary items, where prices are falling quite sharply; making their
inflation rates lower. The under 30s currently face the lowest rate of
inflation, at just 2.2%, since they are benefiting most from falling prices of clothing
and audio-visual goods.
“It
is the gap between the inflation rates facing the young and elderly which continues
to cause concern, and this gap has only widened further this month. This highlights
the extent to which the elderly are not reaping the same relative benefits of
easing price pressures.
You can obtain a copy
of the report by emailing contact@alliancetrust.co.uk or phoning
08000 326323.
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Jane Holligan, Communications Manager |
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Finsbury
Group |
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Tel: +44 (0)1382
306 064 |
Tel: +44 (0)20
7251 3801 |
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Email: alliancetrust@finsbury.com |
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Web:
www.alliancetrust.co.uk |
Web:
www.finsbury.com |
Notes to editors
- Alliance Trust PLC is a self-managed investment
company with investment trust status. A FTSE-100 company, it is the
largest
- 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.
- Photographs
of Shona Dobbie are available on request.
- Inflation
and age chart is shown below.
Inflation and Age (January 2007 to April 2009)
Source: In-house