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Inflation rate facing the elderly hits a six-year high of 7.8%

14th October 2008 Print
Alliance Trust's ongoing monthly study of age related inflation has found that the over 75 year olds continue to be hit the hardest by rising inflation, and the pain is getting worse. This age group saw their inflation rate jump from 7.0% to 7.8% in September. The inflation rates facing all other age groups increased by a smaller margin in September but now all face an inflation rate of 5% or higher.

Over 75 year olds also continue to suffer from high food prices. Although food price inflation eased in September, prices are still almost 13% higher than a year ago. This hits the over 75 year old age group hardest as they allocate 16% of their household budget to food compared to less than 9% for the under 30 households. Inflation for many basic food items is even higher than this. Bread & cereal prices have increased almost 16% and meat prices have gained 19% over the last year.

Although everyone is facing a high rate of inflation at this time, younger generations continue to benefit from the fact that they spend a higher proportion of their incomes on discretionary items, such as audio visual goods, clothing and footwear, where prices continue to fall. Over the last year, the prices of audio-visual goods have fallen by 12% and clothing prices have dropped by 7%. The under 30s spend 6% of their budget on clothing, which is almost double the amount allocated by the over 75 year olds. The inflation rate facing the under 30s is the lowest of all the age groups at 5.0% and is in fact lower than the official rate of 5.2%.

Shona Dobbie, Head of the Alliance Trust Research Centre said, "We are seeing the highest levels of inflation in the history of our six year study. The over 75s are facing a rate of inflation 50% higher than the official rate of inflation, which is currently 5.2%, mainly due to rising utilities costs which have soared over the past year. The recent gas and electricity price hikes hit the elderly the hardest because they spend a higher proportion of their household budget on such services. This current spike in inflation is particularly worrying for elderly consumers especially as we enter the winter months. Higher gas and electricity prices leave these households with less money to spend elsewhere. However, oil prices have fallen recently and this means that we could see petrol price inflation easing in the coming months."

Food price inflation is still high at almost 13% with some basic foods, such as bread & cereals and meat displaying inflation levels even higher than this. More positively, we are seeing some early signs that food price inflation has peaked which could provide some welcome relief to stretched consumers. Unfortunately, even when inflationary forces begin to ease, we expect actual price levels for basic goods and services to remain high which will continue to weigh on consumer confidence and spending."