Older age groups face inflationary pressures

Source : Alliance Trust
Published on 18 January 2011 02:30 PM

The inflation rate facing the 65-74 year old age group has risen to 4.5% and the rate facing the over 75 year olds has increased to 4.3%, both of which are considerably higher than the official headline rate of 3.7%

This month’s official inflation report showed that the headline rate of inflation rose for the third month, advancing from 3.3% to 3.7%. However, Alliance Trust’s monthly study of inflation rates facing different age groups reveals that the elderly age groups saw their inflation rates increase even more sharply.

The inflation rate facing 65-74 year olds rose from 4.0% to 4.5%, while that facing the over 75s increased from 3.8% to 4.3%. These age groups are hardest hit by the current rise in food price inflation, but also by rising utility prices. Gas prices have increased by 5% from November. This will maintain upward pressure on the inflation rates facing those of a pensionable age, since it is these age groups which spend the largest proportion of their incomes on heating their homes.

Food price inflation has more than trebled since June, to reach a level of almost 6%. Price increases are widespread but particularly noticeable in fruit, where prices have risen almost 9% over the past year, and vegetables, where the increase is 8%. Price inflation is also high in other staple food groups, including bread and cereals, where prices have increased by almost 7% over the past year.

As has been the case for the past 15 months, the rate of inflation facing the 50-64 year old group is boosted by higher transport costs. This age group currently faces an inflation rate of 4.5%. Transport prices have risen almost 7% over the last year as fuel prices have increased almost 13% and air fares by 14%. For the third consecutive month, the under 30s age group faces the lowest rate of inflation, at 3.9%, helped by the fact that prices for audio-visual equipment have fallen by more than 5% over the last year.

Shona Dobbie, Head of the Alliance Trust Research Centre, said, "This month the inflation rates facing all age groups have risen, but the increases are particularly noticeable for those of a pensionable age. These two age groups are suffering in particular from recent price increases in both food and utilities. Although the increase in VAT will hit everyone, we expect ongoing upward pressures on food prices and utility bills to have the biggest impact on the two most elderly age groups, since it is these households which spend the largest proportion of their incomes on these basic goods and services.”

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