As mentioned in our article Inflation: what it is and why it matters, the headline inflation figure that we often see reported is an average – taken across 700 goods and 140 locations. But nobody, of course, will buy the same 700 goods at the same 140 locations in the same quantity as the Office for National Statistics (ONS)… so the inflation we each experience is certain to be different to that headline measure.
So the ONS average shopper is no more than an imaginary creature. But with a little analysis, we can refine the figures down to show how inflation may vary across different age groups.
Every year, the Office for National Statistics publishes its ‘Family Spending’ report. Within this extensive report, we’re able to identify how spending patterns differ for different age groups.
For example, from the latest Family Spending report we know that over-75s on average spend a greater proportion of their money on food and non-alcoholic drinks than all other age-groups; those in mid-life – that is those aged 30-to-49 years old – spend a greater proportion of their money on clothing compared to all other age groups; and younger people aged under 30 spend a greater proportion of their money on housing than all other age groups.
We can use these differences in spending habits to identify how different age groups have experienced inflation over recent times.
Could inflation be lower for people in later life?
Aviva’s analysis shows that, for much of the recent past, those in later life have benefited more by falling food and non-alcoholic drink prices. Food and non-alcoholic drink prices were reported to be falling, on average, throughout the whole of 2015 and 2016. Older shoppers, aged over 60, spent a greater proportion of their money on these items over this period so they have, on average, benefited more than other age groups from these falling prices. Over much of the recent past, those in later life have experienced an inflation rate below the headline average.
On the contrary, those under the age of 30 have been suffering from higher price rises in areas where they spend more of their money, on average. For example, prices for education and housing have been rising and these are areas where the young typically spend more of their money. Over much of the recent past, younger shoppers have been experiencing an inflation rate above the headline average.
Since mid 2016, the fall in the value of the pound has pushed up the prices of many exports, including food, so the low inflation being experienced by older shoppers has been coming to an end. The price of oil has also seen something of a rise, resulting in higher transport and heating costs for many of us. The differences between age groups have been narrowing over recent times.
The main message here is that inflation is different for everyone, based on our shopping habits. We should pay attention to the headline measure that we see in the news, but we should probably pay more attention to our own budgets and how they are being squeezed. Carefully budgeting every month will help us navigate choppy waters, regardless of rising or falling prices.
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