19 January 2010

 

WORKING AGE GROUPS FACE RATE OF INFLATION OF MORE THAN 4%

 

  • Latest figures from Alliance Trust R esearch Centre show that inflation rates facing all age groups rose sharply during December. The two working age groups, the 30-49 year olds and 50-64 year olds, now face inflation rates of more than 4%
  • In particular the inflation rate facing the 50-64 year olds jumped from 2.8% to 4.1%, moving above 4% for the first time since November 2008. This age group now faces a rate of inflation which is 41% higher than the official rate
  • For the third consecutive month, the over 75s face the lowest rate of inflation, at 3.3%. Although this rate of inflation is still high, this age group is being helped by the fact that gas and electricity prices are lower than at this time last year, and food price inflation remains relatively low
  • All five age groups face rates of inflation which are in excess of the official headline rate of 2.9%

 

This month’s official inflation report showed that the headline rate of inflation rose from 1.9% to 2.9% in December. Alliance Trust’s monthly study of inflation rates facing different age groups reveals that each group continues to face a rate of inflation considerably higher than the official rate, and that these have increased even further this month. The 50-64 year old age group now

face the highest rate of inflation, at 4.1%, followed very closely by the 30-49 year old age group, whose current inflation rate is 4.0%. The 50-64 year old group is facing a rate of inflation which is 41% higher than the official rate, due largely to the fact that this group spends relatively more on transport, where inflation is currently high, at almost 9%. In particular, fuel price inflation is currently running at more than 18%. For the third consecutive month, the over 75s are facing the lowest rate of inflation, at 3.3%, helped by the fact that this group spends relatively more on food and utilities, where inflationary pressures remain contained.

 

Shona Dobbie, Head of the Alliance Trust R esearch Centre, said, "As expected, inflationary trends have increased sharply this month, reflecting the anniversary of the VAT cut in December 2008, higher fuel costs and the fact that the recent depreciation of sterling is pushing up the cost of imported goods. These price moves are currently having the greatest impact on the two working age groups, who spend a larger proportion of their budgets on the goods and services which are seeing high price increases. The fact that the working age groups now face an inflation rate of more than 4%, but average earnings have grown by only 1.5% over the last year, highlights the sharp erosion of purchasing power which is taking place at this time.”

 

Age Group

Inflation Rate

Under 30

3.6%

30-49 Year Olds

4.0%

50-64 Year Olds

4.1%

65-74 Year Olds

3.8%

75 and Over

3.3%

 

Utility price inflation remains negative this month, at -6.1%, whilst electricity price and gas price inflation rates were constant at -8.2% and -5.9% respectively. The negative rate of inflation in both of these categories helps the over 75 year olds in particular, as it is this age group which spends the highest proportion of their budgets on these services. The elderly spend more than 7% of their budget on electricity and gas bills; whereas the under 30 year olds spend just over 3% on these services.

 

The youngest age group also continues to benefit, in relative terms, from a combination of factors, including ongoing deflation in prices for both clothing and audio-visual goods. Clothing prices are almost 5% lower than at this time last year and prices of audio visual goods are down by 7%.

 

Higher transport costs are hitting the working age groups hardest. These have risen by almost 9% over the last year, with fuel price inflation currently running at well over 18%.

 

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

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

 

Clare Dundas/ Anjali Unnikrishnan

Finsbury Group

Tel: +44 (0)20 7251 3801

Email: alliancetrust@finsbury.com

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 UK investment trust by market value listed on the London Stock Exchange.

 

  1. The R esearch 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 on request.

 

  1. Inflation and age chart is shown below.

 

Inflation and Age (January 2007 to December 2009)

 

Source: In-house