Elderly still face higher inflation despite falling food prices

This month's official inflation report showed that the headline rate of inflation fell from 1.8% to 1.6% in August. Alliance Trust's monthly study of age-related inflation rates reveals that retired households continue to face greater price pressures. The 65-74 year olds face an inflation rate of 1.9%, which is 19% higher than the official rate, while the over 75 year olds face an inflation rate of 2.2%, 37% higher than the official rate. The gap between inflation rates facing the young and old has narrowed to the lowest since April 2008, helped by lower food and utility price inflation.

Shona Dobbie, Head of the Alliance Trust Research Centre, said, "It is encouraging to see that inflationary pressures facing the elderly have receded this month, but we need to remember that the elderly are still facing a much higher rate of inflation than the younger age groups. Recent declines in food and utility price inflation have helped to ease inflationary pressures on these households, but despite that, their inflation rates remain higher than those for the young. The 65-74 year olds face a rate of inflation of 1.9%, and the over 75 year olds face a rate of inflation of 2.2%, both of which are higher than the official rate of inflation of 1.6%. The benefits of falling prices continue to come through more slowly for the elderly, who spend a larger share of their budgets on basic goods and services."

Utility price inflation slowed this month from almost 10% to just over 4%. Electricity price inflation also eased, to just over 2%, while gas price inflation remains higher at 10%. Despite the slowing of inflation in these categories, the over-75 year olds continue to be hit the hardest by basic good price inflation, since they spend more than 7% of their budget on electricity and gas bills; whereas the under 30 year olds spend just over 3% on these services.

Lower food price inflation also helped to pull the over-75 year olds' inflation rate down over the month. Annual food price inflation slowed to less than 2% in August, but because it is still higher than the overall inflation rate, it continues to act as a burden for elderly households. Over-75 year old households allocate more than 16% of their household budget to food, compared to just 9% for the under-30s.

This month, the under-30s and the 30-49 year old age groups saw a fall in their inflation rates to 1.7%. These younger age groups continue to benefit from the fact that price inflation in audiovisual goods, clothing and footwear is still falling sharply. Over the last year, the prices of audio-visual goods have fallen by more than 9%; clothing prices have dropped by almost 10%; and footwear prices by more than 4%. The under-30s spend almost 6% of their budget on clothing and footwear, compared to the 4% allocated by the over 75 year olds.