Saga's latest report shows inflation is on the increaseMonday 1 January 0001
- The main drivers of this increase were higher prices for clothing, vehicle fuels and furniture. These upward pressures were partially offset by lower prices for air and sea transport.
- Annual inflation on the Retail Price Index (RPI) rose to 2.2% in November, after standing at 2.0% in October.
- As expenditure patterns vary across households, inflation rates differ between age bands. We account for these differences, and calculate inflation by age band based on typical expenditure.
We calculate that annual consumer price index (CPI) inflation was as follows for the over 50s age bands in November 2016 (October 2016 figures in brackets):
- 50-64: 0.9% (0.7%)
- 65-74: 0.7% (0.5%)
- 75 and over: 0.7% (0.5%)
We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in November 2016 (October 2016 figures in brackets):
- 50-64: 1.8% (1.4%)
- 65-74: 1.9% (1.5%)
- 75 and over: 1.7% (1.4%)
- After October saw CPI fall slightly to 0.9%, this has risen back again in November. November’s rise in CPI chimes with the long-term upward trend in prices following the pound’s sharp devaluation earlier this year.
- At 1.2%, CPI in November is at its highest since October 2014. Such inflation has been felt by the over 50s as their typical basket of goods consumed has seen some significant price increases. Over the past year, transport prices have risen by 2.5%, clothing and footwear prices have risen by 0.9%, and prices for restaurants and cafes have increased by 2.8%.
- Typically CPI is lower for over 50s than the average for all age groups. Certain key items bought by over 50s have not risen in price, or have actually fallen in price over the past year. This offsets some of the price rises for other items.
- Prices of non-alcoholic drinks have fallen by 4.1% and food prices have decreased by 1.8% over the last 12 months. Yet, when compared to October, food and non-alcoholic drinks prices actually rose in November, by 0.5% and 0.1% respectively.
- In 2017, it is likely that inflation will rise significantly further, with the higher costs of imports translating to higher consumer prices. Food price rises could be especially significant, as these make up a larger share of total expenditure for over 50s than for younger age groups. Despite fierce competition in the supermarket sector, it is likely there will be further rises in grocery prices. This will put pressure on the budgets of the over 50s.
- Between January 2008 – near the start of the financial crisis – and November 2016, the cost of living for those aged 50-64 has risen at a slightly slower rate than the UK average, on RPI-based measures of inflation which include mortgage interest payments. However, for those aged over 65, who did not benefit from lower interest rates and mortgage interest payments, inflation has been higher than for the average citizen. Furthermore, over 65s were also particularly impacted by increases in food and utility prices prior to the UK entering a period of ‘noflation’.
Compared with January 2008, living costs have risen for different age bands as follows:
- 50-64: 23.9%
- 65-74: 26.5%
- 75 and over: 27.3%
- Whole population (RPI): 26.5%
- Up until late 2016, inflation had been rising only gradually month by month. However, the Brexit vote led to a sharp drop in the value of sterling. This means higher prices for imported goods, which are being passed onto consumers in time.
As a result, there was a sharp rise in inflation in September, and it has remained comparatively high since. It is expected that in 2017 CPI will rise above 2%.
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