Over 75s saw highest inflation in May says Alliance Trust Economic Research Centre

18th June 2013

img

The 75 and over age group faced the highest rate of inflation in May at 3.0%, a 0.1% rise on the previous month, according to the Alliance Trust Economic Research Centre.

This month’s official inflation report from the ONS showed that the headline rate of inflation rose from 2.4% to 2.7%.

The elderly households continue to face an elevated rate of inflation, partly due to the fact that gas and electricity price inflation remains high. Gas price inflation was unchanged at 8.3% and electricity price inflation rose from 7.6% to 7.7%.

High inflation in these categories disproportionately affects the elderly as they allocate a higher proportion of spending to these areas. A fall in food price inflation, from 5.0% to 4.4% helped to mute the increase in the inflation rate facing the elderly households in May.

Alliance Trust’s monthly study of inflation rates affecting different age groups found that the over 75s still face the highest rate of inflation at 3.0%, a slight increase from 2.9% last month. However, it was the under 30s and 30-49 year olds who experienced the largest change in their inflation rate over the month and this was due to higher clothing price inflation together with an increase in the transport service category, in particular air fares.

It was the under 30s and 30-49 year old groups which saw the largest change in their inflation rates over the month. One of the reasons for this was the fact that clothing price inflation rose from -0.4% to 1%. These two age groups allocate a relatively high proportion of spending to this category and were therefore affected to a larger degree. On top of this, a sharp rise in the transport service category also pushed the inflation rates of these age groups higher. Air fare price inflation rose from 0.8% to 21.3% which caused the sharp increase.

Spending Weights

Age Group Food Electricity Gas Petrol Clothing/ Footwear
Under 30 9.8% 2.3% 1.7% 5.0% 5.2%
30-49 Year Olds 11.3% 2.3% 2.1% 6.4% 5.8%
50-64 Year Olds 12.4% 2.5% 2.3% 6.7% 5.2%
65-74 Year Olds 14.2% 2.8% 3.2% 5.5% 4.8%
75 and Over 15.7% 3.7% 3.9% 3.4% 3.1%

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

Source: The Family Spending Survey: 2012 edition and In-house Analysis

Linsey Thomson, Senior Economic Analyst, says: “Our analysis shows that the over 75s continue to suffer the highest rate of inflation. The oldest households spend relatively more of their budget on basic goods and services, and this has left their inflation rate elevated. Consistently high gas and electricity price inflation continues to push the inflation rate of this age group higher and if food price inflation had not moderated in May, then we would have likely seen it push higher still. Despite this, however, the elderly have been suffering the highest rate of inflation since the start of the year.

“The younger age groups – the under 30s and 30-49 year olds – saw the largest change in their inflation rates this month and this was driven by an increase in clothing price inflation and a jump in air fare price inflation. Notwithstanding this, they still face an inflation rate which is lower than the elderly. One of the reasons is the fact that petrol price inflation remained negative for the second consecutive month, an area which benefits the younger age groups.”

Age Group Inflation Rate
Under 30 2.7%
30-49 Year Olds 2.4%
50-64 Year Olds 2.3%
65-74 Year Olds 2.2%
75 and Over 3.0%

Leave a Reply

Your email address will not be published. Required fields are marked *