18 August 2009
NO PROGRESS FOR ELDERLY AS INFLATION
DECLINE STALLS
·
Latest figures from
·
The gap between
inflation rates facing the young and old has narrowed this month due to an
increase in the rate of inflation facing the young. However, the elderly
currently face an inflation rate 56% higher than the under 30 year olds
·
Our three working age groups all face a similar rate of
inflation, of close to 1.8%, but our two retirement age groups face higher
inflation. The 65-75 year olds face an inflation rate of 2.3% and the over 75s
face an inflation rate of 2.8%
·
During the month, gas
prices fell 0.4%, electricity prices were unchanged and food prices fell back
0.6%, but the recent surge in the oil price resulted in a 0.7% rise in petrol
prices
This month’s official inflation report
showed that the headline rate of inflation remained constant at 1.8%. Alliance Trust’s monthly study of age-related
inflation rates reveals that this is the rate of inflation facing working age
groups, but that retired households face greater price pressures. The 65-74 year olds face an inflation rate of 2.3%,
which is 28% higher than the official rate, whilst the over 75 year olds face
an inflation rate of 2.8%, 56% higher than the official rate. This is because retired
households typically spend a higher proportion of their budgets on basic goods
and services, such as utilities and food; where price inflation remains relatively
high.
Shona Dobbie, Head of the
|
Age Group |
Inflation Rate |
|
Under 30 |
1.8% |
|
30-49 Year Olds |
1.8% |
|
50-64 Year Olds |
1.8% |
|
65-74 Year Olds |
2.3% |
|
75 and Over |
2.8% |
Utility price inflation remains relatively high,
at almost 10%. Electricity price inflation is below 7%, but gas price inflation
remains much higher, at almost 23%. These basic price pressures 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 again this month, this
remains above 4%, much higher than the overall rate of inflation. This trend again
hits the over 75s most acutely, as they allocate more than 16% of their
household budget to food, compared to just 9% for the under-30s.
This month, the under 30s and the 30-49
year old age groups saw a rise in their inflation rates, to 1.8% in both cases.
These younger age groups have been hit this month by a 0.9% increase in rents,
a 3% rise in second hand car prices and a 4.6% rise in transport service
prices. These effects outweighed the ongoing benefit
from the fact that price inflation in audio-visual goods, clothing and footwear
continues to fall sharply. Over the last year, the prices of audio-visual goods
have fallen by more than 10%; clothing prices have dropped by almost 10%; and
footwear prices by more than 5%. 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 in basic goods and services remains relatively high, and
this continues to hit the elderly in
particular. With little improvement in either gas or electricity price
inflation, and with food price inflation remaining relatively high, retired households
are facing inflation rates which are higher than those facing working age
groups. Although younger age groups are also affected by high costs for basic
goods, they spend proportionately more of their income on discretionary items,
where prices continue to fall quite sharply.”
“However, this
month we have seen the inflation rates facing the under 30s and 30-49 year olds
increase, narrowing the gap between the inflation rates facing the young and
elderly. We expect to see this gap narrow further over the next few months, as
inflationary pressures abate.”
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 |
Clare Dundas/ |
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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 July 2009)
Source: In-house