Prices Rise Most For PensionersPosted on: 23 September 2008 by Gareth Hargreaves
The inflation rate facing elderly people jumps to seven per cent.
The inflation rate facing the over 75 year olds jumped to 7 per cent in August, the highest level in Alliance Trust's six year study and 49 per cent higher than the official rate of inflation of 4.7 per cent.
Gas prices have increased almost 28 per cent over the last year, electricity prices have risen 18 per cent and food prices have increased by almost 15 per cent. At the same time petrol prices are up nearly 21 per cent over the last year.
Under 30s are the only age group to face an inflation rate lower than the official rate.
Research Centre says that inflation is close to peaking, but the current high level of inflation is forcing authorities to leave interest rates higher for longer, hurting economic growth further.
Alliance Trust's independent study of age related inflation has found that the over 75 year olds continue to be hit the hardest by rising inflation, and the pain is getting worse. This age group saw their inflation rate jump from 6.3 per cent to 7.0 per cent in August.
The inflation rates facing most other age groups increased by a smaller margin in August, but almost all face a rate which is higher than the official rate of 4.7 per cent.
Gas prices have increased almost 28 per cent over the last year and electricity prices have risen by 18 per cent, hitting the over 75 year olds the hardest. This age group spends almost 7 per cent of their budget on electricity and gas bills whereas the under 30 households spend just 3 per cent on such utilities.
Over 75 year olds have also suffered from the ongoing surge in food prices, which have increased by almost 15 per cent over the last year.
This hits the over 75 year old age group hardest as they allocate 16 per cent of their household budget to food compared to less than 9 per cent for the under 30 households.
Inflation for many basic food items is even higher than this. Bread and cereal and meat prices have all increased by 17 per cent over the last year and milk, cheese and egg prices have surged 19 per cent.
"This current battle with inflation is particularly worrying for consumers as it is being driven by higher prices for basic goods and services," explains Shona Dobbie, Head of the Alliance Trust Research Centre.
"This leaves households with less money to spend on the items where prices continue to fall."
Although everyone is facing a high rate of inflation at this time, younger generations continue to benefit from the fact that they spend a higher proportion of their incomes on leisure items such as audio visual goods, clothing and footwear, where prices are still dropping.
Over the last year, the prices of audio-visual goods have fallen by almost 13 per cent, and clothing prices have dropped by almost 8 per cent. The under 30s spend 6 per cent of their budget on clothing, which is almost double the amount allocated by the over 75 year olds.
The inflation rate facing the under 30s is the lowest of all the age groups at 4.5 per cent and is in fact lower than the official rate of 4.7 per cent.
It's uncertain whether inflation and prices for pensioners will ease soon, according to Dobbie.
"The oil price has fallen back recently and this means that we could see petrol price inflation easing. The recent gas and electricity price hikes could offset this to some degree however we think that we are close to the peak in inflation."
"Even when inflationary forces begin to ease, we expect actual price levels for basic goods and services to remain high which will continue to weigh on consumer confidence and spending."
"We are concerned that this current high level of inflation is forcing policy makers to leave interest rates higher for longer, threatening the future growth path for the economy as a whole."
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