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Pensioners feeling inflation the most

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17/07/2008

Alliance Trust’s study of age-related inflation has found that those aged over 75 continue to be hit the hardest by surging inflation.

The age group saw their inflation rate increase from 4.8% to 5.4% in June and the inflation rates facing all other identified age groups have also increased, with the majority running ahead of the official headline rate of inflation of 3.8%.

Inflation continues to be driven by sharply rising basic goods prices. The over 75 year olds are hardest hit by surging food prices, which have risen by almost 11% over the last year.

This hits the over 75 year olds hardest as they allocate 16% of their household budget to food compared to less than 9% for the under-30 households. Within this, dairy prices have risen over 19% and oil and fat prices are up over 28%. In each of these categories the over 75 year olds allocate almost double the proportion of their household budgets when compared to the younger households.

The over 75 year olds are also hit hardest by higher electricity and gas prices which rose 11% and 10% respectively. This age group spends almost 7% of their budget on electricity and gas bills whereas the under 30 households spend just 3% on such utilities.

Shona Dobbie, head of the Alliance Trust research centre, said: “The pick up in inflation is particularly worrying for the consumer as it is being driven by higher prices for basic goods and services.

“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 gas and electricity prices are expected to move higher. This means that headline inflation is likely to rise a bit further in the next few months. 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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