Inflation remains unchanged for MarchWednesday 15 April 2015
Consumer Price Index (CPI) annual inflation was unchanged at 0.0% in March.
Inflation remains unchanged for March
- Retail Price Index (RPI) annual inflation stood at 0.9% in March, down from 1.0% in February.
- Lower gas prices and price falls across a range of clothing and footwear provided the largest downward contributions to the rate of inflation in March. However, these factors were offset by increases in the price of motor fuels between February and March, leaving the annual rate of consumer price inflation unchanged at its lowest level since the 1960s.
- Given that expenditure patterns vary across households, experienced inflation rates will differ between age bands. We calculate that annual consumer price index (CPI) inflation was as follows for the over 50s age bands in March 2015 (February 2015 figures in brackets):
- 50-64: -0.3% (-0.3%)
- 65-74: -0.5% (-0.5%)
- 75 and over: -0.1% (-0.2%)
- We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in February 2015 (January 2015 figures in brackets):
- 50-64: 0.0% (-0.1%)
- 65-74: -0.1% (-0.1%)
- 75 and over: -0.2% (-0.1%)
- While the UK as a whole avoided falling into deflation in March, Figure 1 illustrates that the 50-74 age group is already experiencing negative inflation due to the continued falls in the price of essential items. Notably, food and utility prices are currently falling on a year-on-year basis – something which is particularly beneficial to the most vulnerable pensioners (for whom expenditure on these items constitutes a more significant share of total spending).
- However, over a longer time frame, the over 50s have seen a greater increase in living costs. Between September 2007 - when the financial crisis started to really get underway - and March 2015, the cost of living has risen by more for the over-50s than for 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 – who had largely or entirely paid off their mortgages or live in social housing – in general failed to benefit from this. Further, the rising cost of essentials such as utilities placed pressure on the living standards of the over 50s. However, this trend has reversed, helping to significantly close the gap between the age groups. Compared with September 2007, living costs have risen for different age bands as follows:
- 50-64: 24.6%
- 65-74: 27.3%
- 75 and over: 27.8%
- Whole population (RPI): 23.6%
- While overall inflation remains non-negative, the prices of a number of goods have fallen over the past 12 months. With these items largely classed as essentials such as food, fuel, gas and electricity, the current spell of weak inflation in the UK is having a positive impact on household finances, freeing up income for discretionary purchases. With food and utilities forming a larger share of over 50s purchases compared with the rest of the population, this age group is particularly benefitting from the current inflationary environment.
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