Under 30s still seeing highest inflation

16th July 2014

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The under 30s continue to see the highest rate of inflation of1.8% due to tuition fees according the latest Alliance Trust survey of inflation across different age groups. The 50-64 and 65-74 year olds have the lowest rate of inflation at 1.5%.

This month’s official inflation report shows that the headline rate of inflation increased from 1.5% to 1.9%.

Alliance Trust’s monthly study of inflation rates affecting different age groups found that all five age groups saw an increase in their inflation rates over the month.

It is still the under 30 age group which has the highest rate of inflation at 1.8%, up from 1.6% in May.

One of the main reasons is that education costs are still more than 10% higher than a year ago, following the significant hike in tuition fees in 2012 which continues to affect the figures today.

This age group was also affected by the increase in airfares this month – the inflation rate for this mode of transport increased from -6% to +3.6%. This move affected the youngest age group disproportionately as they allocate the largest relative share of spending to such transport services.

Once again it is the 50-64 year olds and 65-74 year olds who have the lowest rate of inflation, at 1.5%.

This is up from 1.2% in the previous month. Food price inflation increased from -0.6% to zero, putting upward pressure on the inflation rates of these age groups. One of the main reasons for higher food price inflation was an increase in the inflation rate for bread and cereal products.

But, at the same time, petrol price inflation eased further in June, falling from -2.5% to -3%. Both these age groups spend a relatively large proportion of their budget on petrol and this is one factor contributing to them having the lowest inflation rate at the moment.

One of the main reasons the official rate of inflation increased in June, was the rise in clothing inflation, from -0.2% to +2.5%. It is the 50-64 year old households which allocate the largest proportion of their budget to clothing, another contributing factor to the overall trend of rising inflation.

Note: This table shows the spending patterns of different age groups across different spending categories

Linsey Congdon, Senior Economic Analyst, says :”This month our study shows that it is still the under 30s who are suffering the highest rate of inflation. One of the main reasons for this is that higher education costs continue to keep the inflation rate facing this age group elevated. Although inflation rose for all age groups this month, the increase may not be long lasting.

“The upward move was driven by higher food, airfare and clothing price inflation, some of which may be only temporary. This increase in inflation comes at a time when wage growth remains muted. Average earnings, excluding bonuses, are rising at just 0.9% from a year ago, which means that households have been suffering negative real earnings for more than 4 years. For consumers to see an improvement in their purchasing power, we really need to see a sustained increase in wage growth.

“Our research highlights that it is difficult to apply a generic rate of inflation to all age groups and that small changes in specific categories of goods and services can greatly affect the inflation rate faced by different age groups. For example, the 50-64 year olds allocate, on average, almost 7% of their spending to petrol compared with just 4% for the over 75s. This means that a fall in petrol prices is more beneficial for the 50-64 year olds”.

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1 thought on “Under 30s still seeing highest inflation”

  1. Anonymous says:

    This is an interesting approach. It goes beyond the ONS’s Pensioner Price Indices. Still, the differences aren’t large, as one would expect. The different age groups have quite different expenditure shares on different goods and these goods all have quite different price movements, but there is no reason to expect the goods on which 75 and over people spend more to necessarily have higher price increases or lower price increases than other goods.
    Andrew Baldwin

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