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Inflation surge hits pensioners hardest

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18/06/2008

Alliance Trust’s independent study of age-related inflation has found that the surge in inflation during May continued to hit those aged over 75 the hardest.

This age group saw its inflation rate increase from 4.1% to 4.8% during the month. The inflation rates facing all other identified age groups have also increased and the majority are running ahead of the official headline rate of inflation of 3.3%.

Basic costs continue to rise sharply. Food price inflation has increased by almost 9% over the last year, utility prices have increased by over 11% and petrol prices have risen by almost 20% in the same period.

These price increases have a major impact on the inflation rate facing the elderly as a significant proportion of their household income is spent on basic goods and services. In contrast, younger generations spend a higher proportion of their incomes on clothing, footwear and audio-visual goods, where prices are continuing to fall, helping them to escape the worst of the current inflationary pressures.

These findings confirm the elevated level of inflation facing the older age groups is worsening, driven by high price increases for food, fuel and utilities. Alliance Trust Research Centre predicts that inflationary pressures will remain strong in the coming months for basic goods and services.

Shona Dobbie, head of the Alliance Trust Research Centre, said: “Our study continues to highlight the extent to which inflationary pressures are hitting the elderly hardest. This is because the over 75s are the most exposed to the negative impact of high food and utility prices.

“For the economy, the problem is high inflationary pressures throughout the whole supply chain, but for the consumer the problem centres in particular around the basic goods and services, as these are displaying the sharpest price increases. This leaves us all with less money to spend on the items where prices continue to fall.

“Unfortunately, we expect little respite from this situation over the next couple of months as the oil price is expected to remain high and there are global shortages of some foodstuffs. Headline inflation is likely to rise a bit further in the short term. The danger is that this high level of inflation forces policy makers to leave interest rates higher for longer, increasing the risk of an even greater slowdown in demand and threatening the economy as a whole.”

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