12 April 2016, 01:00
12 April 2016, 01:00
Saga Inflation Report for April
Annual Consumer Price (CPI) inflation stood at 0.5% in March, up from the 0.3% recorded in the previous two readings. Still, inflation remains outside of the Bank of England’s target range.
- The main upward contribution to inflation came from the transport sector. However, much of this was due to the earlier timing of Easter and the associated fare increases for air and rail transport. Further, the price of groceries continued to fall back between February and March.
- In line with the headline rate, annual inflation on the Retail Price Index (RPI) rose to 1.6%, up from 1.3% in February.
- 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 2016 (February 2016 figures in brackets):
- 50-64: 0.1% (0.0%)
- 65-74: -0.1% (-0.2%)
- 75 and over: 0.0% (0.0%)
- We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in March 2016 (February 2016 figures in brackets):
- 50-64: 0.7% (0.6%)
- 65-74: 0.6% (0.5%)
- 75 and over: 0.4% (0.3%)
- On CPI-based measures of inflation, annual inflation for the 50-64 age group rose above zero for the first time since December 2014. However, those aged 65 and over continue to experience either ‘noflation’ or deflation across their typical basket of goods and services. The difference is largely due to the lower prices of essential items. The prices of food, motor fuels and utilities all remain lower than they were a year ago – something that is particularly beneficial to the most vulnerable pensioners (for whom expenditure on these items constitutes a more significant share of total spending).
- Between September 2007 - when the financial crisis started to really get underway - and March 2016, the cost of living for those aged 50-64 has been broadly in line with the UK average, on RPI-based measures of inflation which include mortgage interest payments. The cost of living has risen by more than the UK average for the over 65s – this group for the most part did not benefit from lower interest rates and mortgage interest payments. Over 65s were also impacted by relatively high levels of food and utility price inflation prior to the UK entering a period of ‘noflation’. Compared with September 2007, living costs have risen for different age bands as follows:
- 50-64: 25.4%
- 65-74: 28.1%
- 75 and over: 28.4%
- Whole population (RPI): 25.5%
While headline inflation is creeping up, today’s inflation data continue to paint a bright outlook for the over 50s. Low levels of inflation on essential items leave this demographic with more money to be spent on discretionary purchases such as new plants and garden tools, the price of which has fallen back compared with the same time a year ago.