Elderly still face highest rate of inflation

Tuesday 14th February 2012

Despite a fall in the inflation, it continues to be the over 75 year old households that face the highest rate of inflation, according to research by Alliance Trust.

The latest figures from the Alliance Trust Economic Research Centre show that all households saw a sharp decline in their inflation rates in January. Despite this, elderly households continue to have the highest rates of inflation.

The over 75 year old households faced an inflation rate of 4.3% in January, down from 5.1% in December, the lowest level since December 2010.

The 65-74 year old households saw the sharpest fall in inflation, decreasing from 5% to 3.9% in January. However, it is the 30-49 year olds that now face the lowest rate of inflation, at 3.7%.

Gas price inflation slowed to 19% in January from 20% in December and electricity price inflation eased to 13% from 14%, benefiting the elderly age groups.

Food price inflation was almost unchanged in January, at just over 3%. As the elderly age groups allocate a larger proportion of their budget to food, it makes them particularly vulnerable to changes in food prices, says Alliance Trust. The over 75s allocate almost 17% of their budget to food, compared to less than 9% by the under 30s.

The fall in the inflation rate for the over 75s is partly due to slightly lower gas and electricity price inflation assisting this age group, as they allocate a significantly larger proportion of their budgets to spending on such utilities.

More than 8% of their household spending is allocated to gas and electricity compared to less than 4% by the under 30 year old households.

“This is good news for household budgets and should alleviate pressure on households, as higher inflation has been eroding purchasing power for some time now,” said Linsey Thomson, senior economic analyst at Alliance Trust.

“It’s the over 75 year old households that continue to suffer the highest rate of inflation and this is still due to double digit rises in gas and electricity prices. However, we would expect this effect to diminish through the year, helped by the recent price cuts.”

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