March over 50s inflation bulletin

Tuesday 21 March 2017

  • Annual Consumer Price Index (CPI) inflation increased to 2.3% in February 2017, up sharply from 1.8% in January. Inflation is now at its highest rate since 2013.

  • February’s rise is the fourth consecutive monthly increase in CPI. In August 2016 CPI stood at 0.6%, but consistent upward pressure on prices across a broad range of goods and services has put considerable pressure on household budgets.

  • The main drivers of this increase in CPI were higher prices for transport - chiefly through fuel - and food.

  • Annual inflation on the Retail Price Index (RPI) rose to 2.9% in February, having stood at 2.6% in January.

  • 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 February 2017 (January 2017 figures in brackets):

    • 50-64: 2.2% (1.7%)
    • 65-74: 1.9% (1.4%)
    • 75 and over: 1.7% (1.2%)

We calculate that annual Retail Price Index (RPI) inflation was as follows for the over 50s age bands in February 2017 (January 2017 figures in brackets):

    • 50-64: 3.0% (2.3%)
    • 65-74: 3.1% (2.4%)
    • 75 and over: 2.8% (2.2%)
  • Following ongoing upward pressure from both the weaker pound and higher oil prices, CPI inflation rose 0.5 percentage points from January to February.
  • Prices for goods and services across all categories except for clothing and footwear increased in the year to February 2017. The greatest increase was in transport prices, which rose 6.6% compared to February 2016. Significant rises were seen in prices for restaurants and hotels, up 3.2% annually, and spending on health, up 2.3%. Food and drink costs also rose by 0.2% year-on-year.
  • This takes price inflation above the Bank of England’s 2.0% target, but perhaps more prominently for consumers, brings inflation to exactly the level of earnings growth. Average earnings growth (including bonuses) stood at 2.3% year-on-year in the three months to January. Inflation has now caught up with nominal income growth, meaning zero growth in real wages.
  • Higher fuel costs were once again a driver of rising inflation. This impacts directly on transport costs (road transport prices increased 9.5% annually to February 2017) and housing (prices for liquid fuels rose 61.2% over this period).
  • However, competition in the supermarket sector may help contain further rises, with Asda, Morrisons, and Tesco all pledging to lower pump prices in recent weeks.
  • Such inflation has been felt by the over 50s as their typical basket of goods consumed has seen some considerable price increases. Overall, CPI is now at its highest level since 2013 for all over 50s age brackets.
  • CPI has historically been lower for all ages brackets of the over 50s than for than average of all ages, but in February CPI for the 50-64 age bracket was just 0.1 percentage point below the UK average. This was due to increases in prices for fuels, transport, and restaurants & accommodation.

  • Between January 2008 – near the start of the financial crisis – and February 2017, 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: 27.8%
    • 65-74: 30.7%
    • 75 and over: 30.4%
    • Whole population (RPI): 27.9%

  • Given the upward price pressures of the weaker pound and higher oil prices, we expect inflation to rise further during 2017. Cebr expects CPI inflation for all ages to average 2.5% in 2017.

Table 1: Table of annual price inflation – Saga Price Indices and Consumer Price Index

 

Saga Price Indices – CPI based measures

CPI

Age Band

50-64

65-74

75 and over

Whole UK population

2013 Nov

1.9%

1.9%

2.3%

2.1%

2013 Dec

1.9%

1.8%

2.2%

2.0%

2014 Jan

1.8%

1.7%

2.1%

1.9%

2014 Feb

1.6%

1.5%

2.0%

1.7%

2014 Mar

1.5%

1.4%

1.9%

1.6%

2014 Apr

1.6%

1.4%

1.7%

1.8%

2014 May

1.4%

1.2%

1.6%

1.5%

2014 June

1.8%

1.6%

1.9%

1.9%

2014 July

1.5%

1.3%

1.5%

1.6%

2014 Aug

1.4%

1.2%

1.4%

1.5%

2014 Sep

1.0%

0.8%

1.2%

1.2%

2014 Oct

1.1%

0.9%

1.2%

1.3%

2014 Nov

0.7%

0.5%

0.9%

1.0%

2014 Dec

0.3%

0.1%

0.4%

0.5%

2015 Jan

-0.1%

-0.3%

0.0%

0.3%

2015 Feb

-0.3%

-0.5%

-0.2%

0.0%

2015 Mar

-0.3%

-0.5%

-0.1%

0.0%

2015 Apr

-0.5%

-0.7%

-0.3%

-0.1%

2015 May

-0.2%

-0.4%

-0.1%

0.1%

2015 Jun

-0.4%

-0.6%

-0.2%

0.0%

2015 Jul

-0.3%

-0.5%

-0.1%

0.1%

2015 Aug

-0.4%

-0.5%

-0.1%

0.0%

2015 Sep

-0.5%

-0.6%

-0.2%

-0.1%

2015 Oct

-0.5%

-0.6%

-0.3%

-0.1%

2015 Nov

-0.2%

-0.3%

-0.1%

0.1%

2015 Dec

-0.1%

-0.2%

-0.1%

0.2%

2016 Jan

0.0%

-0.2%

0.0%

0.3%

2016 Feb

0.0%

-0.2%

0.0%

0.3%

2016 Mar

0.1%

-0.1%

0.0%

0.5%

2016 Apr

0.0%

-0.2%

0.0%

0.3%

2016 May

0.0%

-0.2%

0.0%

0.3%

2016 Jun

0.2%

0.0%

0.1%

0.5%

2016 Jul

0.3%

0.1%

0.1%

0.6%

2016 Aug

0.4%

0.2%

0.2%

0.6%

2016 Sep

0.7%

0.5%

0.5%

1.0%

2016 Oct

0.7%

0.5%

0.5%

0.9%

2016 Nov

0.9%

0.7%

0.7%

1.2%

2016 Dec

1.3%

1.1%

1.0%

1.6%

2017 Jan

1.7%

1.4%

1.2%

1.8%

2017 Feb

2.2%

1.9%

1.7%

2.3%

Source: ONS, Cebr analysis

Table 2: Table of annual price inflation – Saga Price Indices and Retail Price Index

 

Saga Price Indices –RPI based measures

RPI

Age Band

50-64

65-74

75 and over

Whole UK population

2013 Nov

2.3%

2.3%

2.4%

2.6%

2013 Dec

2.4%

2.4%

2.4%

2.7%

2014 Jan

2.4%

2.4%

2.4%

2.8%

2014 Feb

2.3%

2.3%

2.4%

2.7%

2014 Mar

1.9%

2.0%

2.2%

2.5%

2014 Apr

2.0%

2.1%

2.2%

2.5%

2014 May

1.8%

1.8%

1.8%

2.4%

2014 June

2.0%

2.1%

2.1%

2.6%

2014 July

1.9%

2.0%

1.9%

2.5%

2014 Aug

1.7%

1.7%

1.7%

2.4%

2014 Sep

1.5%

1.5%

1.6%

2.3%

2014 Oct

1.5%

1.5%

1.5%

2.3%

2014 Nov

1.1%

1.2%

1.2%

2.0%

2014 Dec

0.7%

0.6%

0.6%

1.6%

2015 Jan

0.2%

0.2%

0.1%

1.1%

2015 Feb

-0.1%

-0.1%

-0.1%

1.0%

2015 Mar

0.0%

-0.1%

-0.2%

0.9%

2015 Apr

-0.1%

-0.2%

-0.3%

0.9%

2015 May

0.2%

0.1%

0.0%

1.0%

2015 Jun

0.2%

0.1%

0.0%

1.0%

2015 Jul

0.1%

0.0%

-0.1%

1.0%

2015 Aug

0.2%

0.1%

0.0%

1.1%

2015 Sep

-0.1%

-0.1%

-0.2%

0.8%

2015 Oct

-0.1%

-0.1%

-0.2%

0.7%

2015 Nov

0.2%

0.2%

0.1%

1.1%

2015 Dec

0.3%

0.2%

0.0%

1.2%

2016 Jan

0.5%

0.5%

0.3%

1.3%

2016 Feb

0.6%

0.5%

0.3%

1.3%

2016 Mar

0.7%

0.6%

0.4%

1.6%

2016 Apr

0.5%

0.5%

0.4%

1.3%

2016 May

0.6%

0.6%

0.5%

1.4%

2016 Jun

0.8%

0.8%

0.7%

1.6%

2016 Jul

1.1%

1.0%

0.9%

1.9%

2016 Aug

0.9%

1.0%

0.9%

1.8%

2016 Sep

1.4%

1.4%

1.3%

2.0%

2016 Oct

1.4%

1.5%

1.4%

2.0%

2016 Nov

1.8%

1.9%

1.7%

2.2%

2016 Dec

2.1%

2.2%

2.0%

2.5%

2017 Jan

2.3%

2.4%

2.2%

2.6%

2017 Feb

3.0%

3.1%

2.8%

2.9%

Source: ONS, Cebr analysis

Table 3: Annual increase in prices, for selected goods and services

 

Food and non-alcoholic beverages

Clothing and footwear

Housing, water and fuels

Gas

Electricity

Transport

2013 Nov

2.8%

1.1%

3.4%

6.3%

6.7%

0.2%

2013 Dec

1.9%

1.6%

3.7%

7.8%

8.1%

0.5%

2014 Jan

2.0%

1.7%

3.6%

6.7%

8.0%

0.5%

2014 Feb

1.8%

0.8%

3.2%

5.9%

6.9%

-0.4%

2014 Mar

1.7%

0.2%

3.1%

5.6%

6.7%

-1.0%

2014 Apr

0.5%

1.2%

3.0%

5.1%

6.0%

1.6%

2014 May

-0.6%

-0.1%

3.2%

5.1%

6.0%

0.4%

2014 June

0.0%

2.4%

3.2%

5.1%

6.0%

0.9%

2014 July

-0.3%

-0.2%

3.2%

5.1%

5.6%

1.3%

2014 Aug

-1.1%

0.4%

3.2%

5.1%

5.6%

1.2%

2014 Sep

-1.4%

0.2%

3.1%

5.1%

5.6%

0.1%

2014 Oct

-1.5%

-0.2%

3.2%

5.1%

5.6%

0.5%

2014 Nov

-1.7%

-0.2%

3.3%

5.1%

5.6%

-0.2%

2014 Dec

-1.7%

-0.3%

1.0%

-1.6%

-0.8%

-1.4%

2015 Jan

-2.5%

1.4%

1.0%

-1.0%

-0.7%

-2.8%

2015 Feb

-3.3%

1.7%

0.9%

-1.9%

-0.9%

-2.7%

2015 Mar

-3.0%

-0.2%

0.7%

-4.2%

-0.6%

-1.9%

2015 Apr

-2.9%

-0.4%

0.5%

-3.8%

-0.2%

-2.7%

2015 May

-1.8%

0.2%

0.4%

-4.4%

-0.2%

-1.5%

2015 Jun

-2.2%

-0.8%

0.4%

-4.4%

-0.2%

-1.8%

2015 Jul

-2.7%

1.7%

0.4%

-4.4%

-0.2%

-1.9%

2015 Aug

-2.4%

0.6%

0.4%

-4.4%

-0.2%

-2.6%

2015 Sep

-2.3%

-0.6%

0.1%

-6.4%

-0.2%

-2.7%

2015 Oct

-2.7%

0.8%

0.2%

-6.4%

-0.2%

-2.6%

2015 Nov

-2.4%

0.0%

0.3%

-6.4%

-0.2%

-2.1%

2015 Dec

-2.9%

-0.3%

0.3%

-6.4%

-0.2%

-0.2%

2016 Jan

-2.6%

0.4%

0.4%

-6.0%

-0.2%

-0.7%

2016 Feb

-2.3%

0.3%

0.3%

-6.0%

-0.2%

-1.1%

2016 Mar

-2.7%

1.4%

0.4%

-6.0%

-0.2%

-0.1%

2016 Apr

-2.5%

0.3%

-0.1%

-7.3%

-0.2%

-1.3%

2016 May

-2.8%

-0.4%

0.0%

-6.7%

-0.2%

-1.0%

2016 Jun

-2.9%

-0.7%

0.1%

-6.7%

-0.2%

-0.2%

2016 Jul

-2.6%

-0.7%

-0.1%

-6.6%

-0.2%

0.2%

2016 Aug

-2.2%

-1.2%

-0.1%

-6.6%

-0.2%

1.0%

2016 Sep

-2.2%

1.1%

0.2%

-4.6%

-0.2%

1.2%

2016 Oct

-2.3%

-0.6%

0.3%

-4.6%

-0.2%

2.3%

2016 Nov

-2.0%

0.9%

0.2%

-4.6%

-0.2%

2.5%

2016 Dec

-1.1%

1.2%

1.8%

-4.6%

-0.2%

5.0%

2017 Jan

-0.5%

0%

0.6%

-5.1%

-0.2%

5.8%

2017 Feb

0.2%

0%

2.0%

-4.4%

-0.2%

6.6%

Source: ONS


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