Inflation rises for the young

Latest figures show that the rate of inflation facing the under-30s has jumped, putting young adults’ inflation rate on a par with the elderly as both face inflation rates above the official headline rate.

While inflation rates facing the elderly have been running above headline rates throughout Alliance Trust Research Centre’s four-year study of age and inflation, this is the first time that young adults’ inflation has matched that of the over-75s.

Alliance Trust’s monthly 'Age and Inflation' alert shows the rate of inflation facing the over-75s is 17% higher than the official headline rate of inflation, despite falling from 2.2% to 2.1% over the month. At the same time, the inflation rate faced by the under-30s accelerated to 2.1% in August, the same rate as the over-75s.

The headline findings, based on the updated spending patterns of different age groups and analysis of official August inflation figures are:

Inflation increased within the under-30s and 30-49 age groups over the month. However, inflation fell back for the over-75s, as gas and electricity price inflation continues to fall.

The groups with the highest rate of inflation are the over-75s and the under-30s, at 2.1%, which is 17% higher than headline inflation of 1.8%.

The elderly, who spend a large proportion of their monthly budget on food, could still feel pressures from rising food prices over the next few months. Food price inflation increased from 2.5% to 2.8% in August.

The youngest age group, the under-30s, experienced the largest increase in inflation as they still face the burden of higher rents and education costs.

Gas and electricity price inflation retreated from the record highs recorded last year. Electricity price inflation is running at less than 3%, but gas prices are now 1% lower, which is the first reported decline since March 2001.

Although the official rate of headline inflation declined to 1.8% in August from 1.9% the previous month, Alliance Trust’s monthly inflation alert shows that the inflation rate facing the over-75s is still 17% higher than the headline rate. However, falling gas and electricity price inflation, which is now at the lowest levels since December 2001, continues to reduce energy cost pressures on the elderly.

Alliance Trust's age-related inflation study has been updated using official price data for August. Our results show that the over-75s inflation fell back to 2.1%, but the under-30s inflation accelerated to 2.1% over the month. The over-75s are benefiting from lower energy prices, but the youngest age group, the under-30s, face pressures from higher rents and education costs. Gas prices fell by 1% in August, which was the first decline since 2001. This is helping to reduce pressures on the elderly, who allocate a higher proportion of their budget to energy related expenditure. At the same time, food price inflation accelerated from 2.5% to 2.8% in August, led by a 10% increase in vegetable prices.

Shona Dobbie, Head of the Alliance Trust Research Centre said, " Even though monthly inflation has fallen, our four-year study continues to highlight the extent to which the UK's elderly are one of the groups hit hardest by current high levels of inflation. Despite a drop in headline inflation to just 1.8% this month, the elderly still face a higher rate of inflation of 2.1%. It is worrying too to see that young adults are now also facing inflation at above the headline rate because of higher rents and education costs, as well as the costs of basic goods. We have to remember, though, that the plight is worse for the elderly since more than four years of higher-than-average inflation has eaten into pensioners’ budgets and left them struggling to pay higher bills.”

“Unfortunately the effects of lower food prices, which have helped bring elderly inflation closer to the average, could be short-lived. Food price inflation moved higher in August, as vegetable prices increased by over 10%. We continue to expect the recent flooding in England and the heat-wave experienced in Europe to have hit food crops and prices will probably rise over the next few months. This would have the biggest impact on the inflation rate facing the over-75s, who spend a much higher proportion of their household budgets on these items.”