Inflation rates abating but food price pressure building

This month's official inflation report showed that the headline rate of inflation fell from 3.2% to 3.1% in July, continuing the declining trend which commenced in May, and which continued in June.  Alliance Trust's monthly study of inflation rates facing different age groups reveals that, for the tenth consecutive month, it is the 50-64 year olds who face the highest rate of inflation, at 4.2%.  This age group is facing a rate of inflation which is 35% higher than the official rate, largely due to the fact that this group spends relatively more of their disposable income on transport, where inflation remains relatively high, at close to 8%.

In contrast, the over 75s and under 30s face the lowest rate of inflation, at 3.6%.  In the case of the over 75s, this is due to the fact that this group spends relatively more of their budget on utilities, where prices are now 1.9% lower than at this time last year.  Electricity prices have fallen by less than 1% over the year, but gas prices have fallen by almost 6%.  In the case of the under 30s, the lower rate of inflation is due to continued declines in both clothing and audio-visual equipment.

Shona Dobbie, Head of the Alliance Trust Research Centre, said, "Overall, inflationary trends have continued to ease this month, helped by less upward pressure on fuel prices and ongoing price deflation in both clothing and audio-visual goods.  This has helped to stabilise, and even ease, the inflation rates facing all of the age groups included in our study.

However, food price inflation has increased again, and more sharply this month than in June.  If this trend continues, it will add to the inflationary pressures facing everyone, but the over 75s in particular." 

Food price inflation has almost doubled this month, to 3%, with inflation being particularly high in fish, fruit and vegetables.  This hits the over 75s in particular as this age group spends the highest proportion of their budget on food.  The over 75s spend more than 17% of their budget on food, compared to less than 10% in the case of the under 30s.