14 July 2009
INFLATION RATE FACING ELDERLY DROPS SHARPLY
TO 2.8% BUT GAP BETWEEN OLD AND YOUNG WIDENS FURTHER
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Latest figures from
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The gap between
inflation rates facing the young and old has widened further this month, with
the elderly facing an inflation rate 75% higher than the under 30 year olds
·
Gas and electricity
prices were both unchanged over the month, and food prices fell back by 0.3%, but
the recent surge in the oil price resulted in a rise in petrol prices of almost
4%
·
Although the
headline rate of inflation continues to decline, basic goods inflation remains relatively
high at 3.4%, 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 to a rate of just 1.8%. 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 0.8%. However, despite this sharp drop, the
elderly still face the highest rate of inflation, at 2.8%. 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 relatively high. The over-75s face an inflation rate that is now 56%
above the headline rate and 75% 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 2.3%.
Shona Dobbie, Head of the
|
Age Group |
Inflation Rate |
|
Under 30 |
1.6% |
|
30-49 Year Olds |
1.7% |
|
50-64 Year Olds |
1.8% |
|
65-74 Year Olds |
2.3% |
|
75 and Over |
2.8% |
Utility price inflation remains high, at
11%. Electricity price inflation is currently below 7%, but gas price inflation
is much higher, at 24%. These basic price
pressures will always 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. Although food price inflation has declined this month, the
downward trend has been limited, and food price inflation is close to 6%. This again
hits the over-75s most acutely, since they allocate more than 16% of their
household budget to food, compared to just 9% for the under-30s. In addition,
although total food price inflation declined, inflation for many basic food
items remains high. Both meat and vegetable prices are almost 7% higher than at
this time last year; fruit prices have risen by 5%; and bread and cereal prices by 4%. All of these price moves are much
higher than the official rate of inflation.
In contrast to the elderly, the under 30s
face an inflation rate which is lower than the official rate, at just 1.6%.
This youngest age group continues to benefit 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 11%; clothing prices
have dropped by almost 10%; and footwear prices by more than 4%. 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 |
Clothing/ Footwear |
|
Under 30 |
9.0% |
1.8% |
1.5% |
4.3% |
5.9% |
|
30-49 Year Olds |
10.9% |
2.0% |
1.8% |
5.0% |
6.3% |
|
50-64 Year Olds |
11.6% |
2.2% |
2.0% |
5.2% |
5.7% |
|
65-74 Year Olds |
14.4% |
2.7% |
2.5% |
4.6% |
4.7% |
|
75 and Over |
16.4% |
3.7% |
3.5% |
3.2% |
3.9% |
Note: This table shows the spending
patterns of different age groups across different spending categories
Shona Dobbie added, “Inflation continues to fall back and the pace of improvement this
month has been encouraging. However, we should be aware that not all price
pressures are easing in a similar way.”
“The prices of
basic goods and services may have fallen, but inflation in this category
remains relatively high, and this continues to hit the elderly in particular. With no
improvement in either gas or electricity price inflation, and with food prices
remaining high, elderly households are hit particularly hard, leaving them with
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.”
“In addition, the
gap between the inflation rates facing the young and elderly has widened
further this month, to 75%. This quite clearly illustrates our concerns
regarding the extent to which the elderly are not reaping the same relative
benefits of easing prices.”
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 |
Anjali Unnikrishnan |
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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 generalist
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 June 2009)
Source: In-house