Young face highest rate of inflation for first time in six years

This month's official inflation report showed that the headline rate of inflation fell from 1.6% to 1.1% in September. Alliance Trust's monthly study of inflation rates facing different age groups reveals that each group faces a rate of inflation higher than the official rate, but that these have fallen sharply this month. In addition, retired households no longer face the greatest price pressures. For the first time in the history of our study, it is the youngest age group which is facing the highest rate of inflation, at 1.5%. This is 36% higher than the official rate, and 7% higher than the inflation rate being faced by the over 75s. The sharp decline in the inflation rate facing the elderly is due to falling prices for both utilities and food.

Shona Dobbie, Head of the Alliance Trust Research Centre, said, "It is very encouraging to see that inflationary pressures facing the elderly have receded, and that, for this month, this age group now actually faces the lowest rate of inflation. However, we are wary that the sharp drops which we have seen in both utilities and food prices may prove to be temporary and that the elderly may enjoy only a brief respite before their inflation rate begins to rise again.

Furthermore, our study shows that the highest inflationary pressures currently face the youngest age group. This is due to a combination of factors including increased prices for clothing, education fees and even second hand cars. The nature of price pressures has therefore altered significantly this month, greatly impacting the different age groups."

Utility price inflation dropped sharply this month to -7.3%, as electricity price inflation eased, to -7.2%, while gas price inflation reached -5.6%. The negative rate of inflation in both these categories has helped the over 75 year olds in particular, and is one of the key reasons their inflation rate has dropped so sharply this month. The elderly 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.

In addition, the elderly have also been helped by the drop in food prices this month and inflation in this category has fallen to just 1.1%, in line with the official headline rate of inflation. Over-75 year old households allocate more than 16% of their household budget to food, compared to just 9% for the under 30s.