Over 75s now face lowest rate of inflation

This month's official inflation report showed that the headline rate of inflation rose from 1.1% to 1.5% in October. Alliance Trust's monthly study of inflation rates facing different age groups reveals that each group continues to face a rate of inflation higher than the official rate, and that these have increased sharply this month. For the first time in almost two years, the over 75s are actually facing the lowest rate of inflation, at just 1.7%. It is the 30-49 year olds who currently face the highest rate, at 2.0%. This rate of inflation is 33% higher than the official rate, and has been boosted by relatively high inflation in transport costs, education fees and second hand cars.

Shona Dobbie, Head of the Alliance Trust Research Centre, said, "As expected, inflationary trends have increased once again this month and it now appears to be the 30-49 year olds who are being hit hardest. The elderly are temporarily benefiting from the drop in gas and electricity prices and the youngest age group continues to benefit from the ongoing decline in prices for clothing and audio-visual goods. Given that the latest report showed that average earnings have risen by just 1.2% over the last year, the fact this age group faces an inflation rate of 2.0% shows the extent to which their purchasing power is being eroded."

Utility price inflation remains negative this month, at -7.1%, as electricity price inflation eased to -8.2%, and gas price inflation fell to -5.9%. The temporary negative rate of inflation in both these categories continues to help the over 75 year olds in particular, and is one of the key reasons this group's inflation rate is the lowest 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.

The youngest age group continues to benefit from a combination of factors, including ongoing deflation in prices for both clothing and audio-visual goods. Prices in both categories have fallen by close to 8% over the last year.

It is transport and education costs which are currently hitting the working age groups hardest. Transport costs have risen more than 4% over the last year, and education costs have risen more than 5%. In addition, the price of second hand cars is important to the 30-49 age group, and this has jumped by more than 13% over the last year.