Saga Inflation Report October 2017 BulletinTuesday 17 October 2017
We calculate that annual Consumer Price Index (CPI) inflation was as follows for the over 50s age bands in September 2017 (August 2017 figures in brackets):
- 50-64: 3.0% (2.8%)
- 65-74: 2.9% (2.7%)
- 75 and over: 2.8% (2.7%)
We calculate that annual Retail Price Index (RPI) inflation was as follows for the over 50s age bands in September 2017 (August 2017 figures in brackets):
- 50-64: 4.0% (4.0%)
- 65-74: 4.3% (4.1%)
- 75 and over: 4.1% (4.0%)
- The current level represents significantly higher inflation than seen in the last few years. In September 2016, CPI inflation stood at just 1.0%. Indeed, this is the highest CPI inflation has been since March 2012.
- The increase in CPI observed this month means that it is still well above the rate of earnings growth, so in real terms incomes continue to fall. In the three months to July 2017, regular earnings (excluding bonuses) increased by only 2.1% compared to the year before.
- At 3.0%, annual growth in food prices was a significant contribution to upward pressure on inflation in September. Food price inflation has been increasing steadily since late 2016, and stood at -2.3% in September 2016.
- Increases in prices for certain types of goods are likely to particularly impact the budgets of over 50s. The prices of furniture rose by 6.3% in the year to September, down from 7.0% in the previous month.
- Water, electricity, gas & other fuel prices have risen by 2.1% in the year to September, up from 0.2% in the same month last year.
- The overall rate of inflation for transport has risen to 4.2% up from 3.2% in the previous month. Also, compared to readings over the past five years, inflation in transport remains at elevated levels.
- In September 2017, the cost of living for all those aged 50 rose at a higher rate than the UK average, on RPI-based measures of inflation which include mortgage interest payments. Previously, the cost of living for those aged 50-64 had been rising at a slower rate than the UK average.
Compared with January 2008, living costs have risen for different age bands as follows for September 2017 (RPI):
- 50-64: 31.0%
- 65-74: 33.7%
- 75 and over: 34.0%
- Whole population: 31.14%
- Cebr forecasts fourth quarter inflation to average 2.6% on the CPI measure and 3.5% on the RPI measure. This will continue to put pressure on consumers and weaken household spending power.
- Inflation is well above the Bank of England’s target rate of 2%, and in September the Bank of England said that it was likely to raise interest rates “in the coming months”. Financial markets have priced in an 85% chance of a rate move on 2nd November, having previously expected an interest rate increase to be more than a year away.
- Political uncertainty and soft growth are set to remain part of the UK’s economic picture going forward and there is little sign of more permanent sources of inflationary pressure such as strong wage growth. Therefore, any rate rise is likely to be small.
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