DISPROPORTIONATE IMPACT OF INFLATION ON OVER 75s

Wednesday 14 August 2013

Consumer Prices Index (CPI) annual inflation fell to 2.8% in July, down from 2.9% in June 2013, but over 75s still bear the brunt of inflationary pressures.

DISPROPORTIONATE IMPACT OF INFLATION ON OVER 75s

July 2013 bulletin

Key points:

 

  • Consumer Prices Index (CPI) annual inflation fell to 2.8% in July, down from 2.9% in June 2013.
  • Retail Prices Index (RPI) annual inflation stood at 3.1% in July, down from 3.3% in June.
  • The largest contributions to the fall in the inflation rate came from air fares, recreation and culture and clothing and footwear. A rise in petrol prices partially offset the fall.
  • Given that expenditure patterns vary across households, experienced inflation rates will differ across age-bands. We calculate that annual consumer price index (CPI) inflation was as follows for the over 50s age bands in July 2013 (June 2013 figures in brackets):
    • 50-64: 2.6% (2.8%)
    • 65-74: 2.4% (2.5%)
    • 75 and over: 3.0% (3.1%)
  • We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in July 2013 (June 2013 figures in brackets):
    • 50-64: 3.0% (3.1%)
    • 65-74: 3.0% (3.0%)
    • 75 and over: 3.0% (3.1%)
  • Figures 1 and 2 illustrate the annual rates of inflation for the over 50s. CPI-based inflation is higher for the over-75s than for the UK as a whole. As in previous months, this largely reflects high rates of utility price inflation at present. Moreover, food and non-alcoholic beverage price inflation rose to 3.9% in July, just up on 3.8% in June. This is higher than overall inflation and is a cost pressure which hits the over 75s relatively hard, given a relatively high proportion of their expenditure consists of foodstuff. The annual rate of electricity, gas and other fuel price inflation rose to 8.2% in July, from 8.0% in June, continuing a recent upward trend. This rise is particularly burdensome for the over 75s because they spend a relatively high proportion of their incomes on energy.
  • As Figure 4 shows, the cost of living in July 2013, compared with September 2007 – when the financial crisis started to really get underway – has risen substantially more for the over-50s than the overall population, on the broad-based RPI measure of prices. While younger age groups benefitted greatly from falling mortgage interest payments as the Bank of England cut interest rates during the recession, older age groups in general failed to benefit from this. Rising commodity prices have increased the costs of domestic energy usage, a considerable proportion of the over 75s living costs. Compared with September 2007, the cost of living has risen for different age bands as follows:
    • 50-64: 22.2%
    • 65-74: 24.7%
    • 75 and over: 25.5%
    • Whole population (RPI): 20.0%

Ends

Full Saga Inflation Report


 

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