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Millennials suffer three times higher inflation than retirees

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
09/05/2016

Millennials suffer greater inflationary pressures than any other generation, with their actual inflation rate three times higher than retirees and almost double the UK’s average inflation rate.

Those aged under 30 experience a real inflation rate of 0.9%, compared with 0.4% for both the gen X (30 – 49 years old) and baby boomers (50 – 64 years old), and 0.3% for those aged over 65, research from Fidelity International shows.

According to its generational inflation series which looked at data in the 12 months to March 2016, millennials face higher inflation as they spend proportionally more on dining out, smartphone and internet subscriptions, rent and household bills – the areas which have suffered the highest price increases.

The younger generation also spend proportionally more on housing (19%) than any other generation, battling the high cost of renting and the struggle to get a foot on the property ladder.

However, the biggest weekly expense is education which significantly drives up their average cost of living.

With only 8% spent on groceries and soft drinks, the under 30s haven’t benefitted from the massive fall in UK food prices driven by the ongoing supermarket discount price war.

In contrast, retirees (those over 65) spend a bigger slice of their income on categories that experience lower inflation like food and non-alcoholic drinks.

The below graph includes a break-down of weekly costs:

YM WeeklySpend Table

Clear generational divide

Maike Currie, investment director for personal investing at Fidelity International, said: “The headline inflation rate tells only half the story. On the surface it may look like the cost of living has barely increased over the last year, but scratch beneath the surface and there is a clear generational divide when it comes to the cost of living.

“This leaves them with little left to save and the challenge of generating higher returns to keep up with the pace of inflation. Unfortunately for millennials this challenge is being met with equally low wage growth – wages remained below their pre-crisis average in 2015 despite unemployment falling back which means this group is also hit by negative real earnings growth.”