Saturday, July 10, 2010

Inflation is not age neutral

There is a lot more to the rate of inflation than can be expressed by a single figure. It is a bit like reading about the increase in life expectancy – it all depends which group in society you are talking about.

The Alliance Trust Research Centre publishes a detailed analysis of the rate of inflation split by different age groups. (The research is not online so I have not been able to give a link). These are the main results:
  • For the eighth consecutive month, it is the 50-64 year olds who are facing the highest rate of inflation, at 4.6%. This is 35% higher than the official headline rate of 3.4%
  • All five age groups saw a decrease in inflation during May. The biggest beneficiaries were the 65-74 year olds, whose inflation rate has fallen from 4.5% to 4.0%, helped largely by a sharp decline in food price inflation
  • The over 75s experienced a decrease of 0.3%, which leaves the rate of inflation facing this age group at just 3.3%, the lowest of all age groups in the study, and lower than the official headline rate
  • The rate of inflation facing the under 30s has fallen to 4.1%, helped by ongoing deflation in clothing and audio-visual products

The reason for the differences by age is accounted by the different consumption habits. The table shows the difference in purchasing some of the main items of expenditure. Be careful with this data since you also need to take into account the absolute level of expenditure of each of the age groups. Dick Stroud

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