Food and fuel prices continue to push headline inflation higher

Alliance Trust’s independent study has found that the inflation rates facing all five of its identified age groups remained above the official headline rate of inflation, based on latest figures released today (Tuesday).

These figures show that in January, inflation hit the 50 to 64 year olds and the 65 to 74 year olds the hardest – these two groups have the highest inflation rate at 2.9% compared to the latest official headline rate of 2.2%. Alliance Trust Research Centre’s headline findings, based on the updated spending patterns of different age groups and analysis of official January inflation figures are:

In January, all age groups faced an inflation rate higher than the official rate of inflation. A combination of higher food and fuel prices offset ongoing declines in utility prices. Food price inflation is 6.6%, the highest since June 2001.

The 50 to 64 year olds face the same inflation rate as the 65 to 74 year olds. Both age groups face the highest rate of inflation, at 2.9%. This is 32% higher than the official headline rate of 2.2%.

For both age groups, rising food and fuel prices are the primary source of inflationary pressures. Prices of dairy products have increased by more than 15% over the last year. Fuel prices are running at record high levels, currently over 19%.

The youngest age group, the under 30s, faced the lowest level of inflation in January. Their rate of inflation was 2.5%, which is still 14% higher than the official headline rate of inflation. The under-30s are benefiting from falling prices of clothing and audio-visual products, but still feel the pressure from higher fuel, education and rent costs.

Alliance Trust Research Centre’s age-related inflation study has been updated using official price data for January. The official rate of headline inflation increased to 2.2% during the month, and our study shows that, all five of our identified age groups continue to face a rate of inflation which is higher than the official headline figure. This is particularly severe for the 50 to 64 year olds and the 65 to 74 year olds. Both age groups face an inflation rate of 2.9%, which is 32% higher than the official headline rate. Although temporary declines in gas and electricity price inflation have helped to reduce some of the energy cost pressures facing these age groups, they continue to be hit particularly hard by higher food and petrol prices. Food price inflation is now at almost 7%, the highest in nearly seven years. Fuel price inflation is currently running at over 19%, the highest level since records began in 1997.

The inflation rate facing the under 30s stands at 2.5%. However, this is still 14% higher than the official headline rate of inflation. Young households are benefiting from falling clothing and audio-visual product prices, as they spend a high proportion of their household budget on these goods. Clothing prices have fallen 5% over the last year and audio-visual prices have declined almost 16%. But at the same time they still face pressures from higher fuel, education and rent costs.

Shona Dobbie, Head of the Alliance Trust Research Centre said, " Our study continues to highlight the extent to which the impact of inflation can differ from the official headline figure. In particular, we repeatedly identify big variations in the inflation rates applying across different age groups, reflecting the different spending patterns of each group. This month we have found that both the 50 to 64 year olds and the 65 to 74 year olds face a rate of inflation of 2.9%, which is considerably higher than the official headline rate of 2.2%.This is due to higher food and fuel prices. We are also concerned about the rate of inflation facing young adults. Their inflation rate is still 14% higher than the official headline rate of inflation and they continue to face pressures from higher rent and education costs, as well as the costs of basic goods.”

“The official headline rate of inflation picked up over the month and inflationary pressures remain strong for many basic goods which we all have to buy on a regular basis. This makes inflation feel much higher than the official level, and leaves less money left over to spend on the more discretionary items, such as clothing and audio-visual goods where prices continue to fall. Recent increases in both gas and electricity prices are likely to push headline inflation higher in the coming months. This is a problem for all age groups, but as the over 75s spend the highest proportion of their household budget on these goods, they could be hit the hardest.”