Welcome inflation fall but poorest households are experiencing the biggest price pressures

Published on Public Finances and the Economy

 

Welcome inflation fall but poorest households are experiencing the biggest price pressures

The poorest households have experienced higher inflation than the richest households since the start of the year, the Resolution Foundation said today (Tuesday) in response to the latest inflation figures, which saw CPIH fall to 2.6 per cent in June.

New Resolution Foundation analysis of how inflation affects different households show that in the first six months of 2017 rising inflation has been driven by housing, food and drink, which poorer households spend a greater share of their income on.

As a result, inflation over the first six months of the year has been 8 per cent higher than the headline figure for the poorest households, and 6 per cent lower for the richest households. Richer households experienced higher inflation in the second half of 2016 when rising inflation was driven by rising oil prices, which fed into transport costs.

Stephen Clarke, policy analyst at the Resolution Foundation, said:

“The small fall in inflation is good news for struggling households, though with average pay growth barely hitting two per cent pay packets will continue to shrink for the rest of the year at least.

“Households experience very different inflation pressures and so far this year rising prices have borne down most heavily on the poorest. For many of these families this higher inflation means an even tighter pay squeeze and an even bigger fall in the value of benefit such as tax credits.

“While there is little that government can do to bring inflation down, it can change how rising prices affect 12 million families whose incomes are being squeezed by the ongoing cash freeze to working age benefits.”

Notes to Editors

The Resolution Foundation analysis shows that the inflation rate experienced by the poorest 10 per cent of households between January and June 2017 was 2.05 per cent, whereas it was 1.79 per cent for the richest 10 per cent of households.