16 June 2009
INFLATION RATE FACING ELDERLY DROPS TO
3.6% BUT GAP BETWEEN OLD AND YOUNG REMAINS PERSISTENTLY HIGH
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Latest figures from
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The gap between
inflation rates facing young and old remains high, with the elderly facing an
inflation rate 71% higher than the under 30 year olds
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Although there was
a drop in electricity prices over the month, and gas prices held steady, petrol
and food prices increased and there were tax related increases in the prices of
alcohol and tobacco following the Budget in April
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Although the
headline rate of inflation continues to decline, basic goods inflation remains
high at 4.6% and it is this rate which impacts most on the elderly
This month’s official inflation report
showed that the headline rate of inflation fell by less than expected, to a
rate of 2.2%. Alliance Trust’s monthly study of
age related inflation rates also reveals a drop in the inflation rate facing
all age groups, with the rate of inflation facing the elderly decreasing the most,
by 0.3%. However, in spite of this drop, this still leaves the oldest age group
facing the highest rate of inflation, at 3.6%. This is because households in
this age group spend the highest proportion of their budgets on basic goods and
services, such as utilities and food; where price inflation remains high. The
over-75s face an inflation rate that is now 64% above the headline rate and 71%
higher than the inflation rate facing the under 30 year olds. The 65-74 year
old age group faces the second highest rate of inflation, at 3.0%.
Shona Dobbie, Head of the
|
Age Group |
Inflation Rate |
|
Under 30 |
2.1% |
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30-49 Year Olds |
2.2% |
|
50-64 Year Olds |
2.4% |
|
65-74 Year Olds |
3.0% |
|
75 and Over |
3.6% |
Utility price inflation has fallen once
again this month, but the move has been limited and inflation in this sector is
still high, at 11%. Although electricity price inflation has dropped to just
below 7%, gas price inflation was unchanged at the much higher level of 24%.
These basic price pressures continue to hit the 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 when food
prices are high. Food price inflation has dropped this month, but again this
downward trend has been limited and food price inflation remains well above 8%.
This hits the over-75s 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. Fruit prices are 11% higher than they were at
this time last year, meat prices are 10% higher, vegetable prices are up more
than 9% and bread and cereal prices have gained almost 8%.
In contrast, the under 30s face an
inflation rate of just 2.1%, 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 almost 12%, while clothing
prices have dropped by more than 9%. The under 30s spend almost 6% of their
budget on clothing and footwear, compared to the 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 continues to fall, but the pace of improvement is
disappointing. Basic cost inflation remains relatively high and this continues
to hit the elderly in particular.
Although electricity and food price inflation is easing, and gas prices were
unchanged this month, price levels in these sectors 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 of their income on discretionary
items, where prices continue to fall quite sharply. This makes their inflation
rates significantly lower. The under 30s currently face the lowest rate of
inflation, at just 2.1%, since they benefit most from falling prices of
clothing and audio-visual goods.”
“The gap between
the inflation rates facing the young and elderly continues to cause us some
concern, as this clearly highlights the extent to which the elderly are not
reaping the same relative benefits of easing prices. The results of our ongoing
study prove that it is misleading to apply one rate of inflation across all age
groups and all types of households.”
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
1.
Alliance Trust PLC is a
self-managed investment company with investment trust status. A FTSE-100
company, it is the largest
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 on request.
4.
Inflation and age chart is shown below.
Inflation and Age (January 2007 to May 2009)
Source: In-house