Elderly Continue To Face Higher Rates of Inflation

Elder Inflation Confirms Funeral Plans Bargain Status.

  • The latest figures from the Alliance Trust Economic Research Centre show that all households experienced a decline in their inflation rates in February. Despite this, elderly households continue to have the highest rate of inflation
  • The over 75 year old households faced an inflation rate of 4.1% in February, down from 4.3% in January, the lowest level since November 2010
  • The 30-49 year olds once again have the lowest rate of inflation, at 3.5%. This is the lowest level since November 2009
  • Gas price inflation slowed to 17% in February, down from 19% in January. Electricity price inflation also eased to 10% from 13%

Elder Inflation – Where are the Bargains?

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This month’s official inflation report showed that the headline rate of inflation fell from 3.6% to 3.4%.  This was reflected in Alliance Trust’s monthly study of inflation rates affecting different age groups, which also shows that inflation rates fell for all households over the month. However, all five age groups continue to face an inflation rate that is higher than the official rate of 3.4%.

Despite a fall in the inflation rates facing all age groups, it continues to be the over 75 year old households that face the highest rate of inflation. The over 75 year old households face an inflation rate of 4.1%, down from 4.3% in January. This is the lowest level since November 2010 and is partly due to slightly lower gas and electricity price inflation benefitting the age group, as they allocate a significantly larger proportion of their budgets to spending on such utilities. More than 8% of their household spending is allocated to gas and electricity compared to less than 4% by the under 30 year old households. However, with inflation in these categories still in double digits, it continues to exert upward pressure on the inflation rate for the over 75 year old households. We would expect this effect to diminish as the gas and electricity price cuts take full effect over the coming year.

Once again it is the 30-49 year olds that face the lowest rate of inflation, at 3.5%. This is the lowest level since November 2009. These households face the lowest rate of inflation due to a combination of factors, including smaller gains in transport and restaurant prices, areas where this age group spend a relatively large proportion of their budget. The 30-49 year olds also allocate a larger proportion of their spending to clothing and footwear than any other age group. This age group allocates almost 7% of spending to this category and inflation in this area has fallen to just 2.2%. Therefore, low inflation in this category is benefitting this age group disproportionately.

Food price inflation was almost unchanged in January, at just over 3%. As the elderly age groups allocate a larger proportion of their budgets to food, it makes them particularly vulnerable to changes in food prices. The over 75s allocate almost 17% of their budgets to food, compared to less than 9% by the under 30s.

Spending Weights

Age Group

Food

Electricity

Gas

Petrol

Clothing/ Footwear

Under 30

8.9%

2.1%

1.8%

4.5%

5.5%

30-49 Year Olds

11.3%

2.1%

2.1%

5.5%

6.5%

50-64 Year Olds

12.1%

2.4%

2.3%

5.8%

5.6%

65-74 Year Olds

14.4%

2.9%

3.1%

5.2%

4.7%

75 and Over

16.8%

4.3%

4.1%

3.4%

3.6%

Note: This table shows the spending patterns of different age groups across different spending categories,

Source: The Family Spending Survey: 2011 and In-house Analysis

 

Linsey Thomson, Senior Economic Analyst, said: “As expected, headline inflation continues to slow as the temporary factors which were boosting inflation fade. This is good news for household budgets and should alleviate pressure on households, as higher inflation has been eroding purchasing power for some time now. One problem remains that, with unemployment rising, we are unlikely to see much acceleration in wage growth. On top of this, the higher oil price is putting further pressure on household budgets through higher petrol prices. Therefore, the outlook for consumption remains muted.

 

The over 75 year old households continue to suffer the highest rate of inflation, with high gas and electricity price inflation keeping the rates they face elevated. However, we do expect gas and electricity price inflation to soften throughout this year, helped by utility price cuts.”

Age Group

Inflation Rate

Under 30

3.7%

30-49 Year Olds

3.5%

50-64 Year Olds

3.6%

65-74 Year Olds

3.7%

75 and Over

4.1%

 

 Elderly Inflation