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Inflation hitting lower income households harder – CSO

By June 3, 2022No Comments

New research from the Central Statistics Office shows that in March households with the lowest incomes experienced higher inflation, up to 7.6% compared to the average rate of 6.7%.

Those in the highest income category had annual estimated inflation of 6.1%, the CSO added.

The rate of inflation stood at 6.7% in March and rose to 7% in April, the highest level in 20 years, recent Central Statistics Office figures show.

The CSO’s Consumer Price Index is a measure of average inflation for all households, but the CSO said that each household has its own unique consumption pattern of goods and services and therefore its own personal experience of inflation.

The research paper published by the CSO today attempts to take account of those differences between households.

The CSO said the increasing rate of inflation since the middle of last year has prompted greater interest in price change and its effects on households.

Households that spend a higher proportion of their total expenditure on goods and services that are increasing in price by more than the rate of inflation will experience higher inflation than the average rate, it added.

The price of electricity, gas and other fuels jumped by 46.7% in the 12 months from March 2021 to March 2022, while the transport index saw an increase of 18.7% in the 12 months to March 2022.

The index for rents also rose by 8.4% in the 12 months to March of this year.

The CSO study found that for households in the lowest 10% by income, electricity, gas and other fuels was the largest contributor to their estimated inflation rate, followed by transport and rent.

For households in the top 10% by income, transport was the largest contributor to their estimated inflation, followed by electricity, gas and other fuels, and restaurants and hotels.

For rural households, transport contributed 3.2 percentage points to their annual estimated inflation of 7.3%, while electricity, gas and other fuels contributed 2.2 percentage points.

Urban households had annual estimated inflation of 6.5%, with transport contributing 2.1 percentage points and electricity, gas and other fuels contributing 1.8 percentage points.

The CSO also found that households paying a mortgage had estimated annual inflation of 6.3% while for households that own their home outright, inflation was estimated to be 7%.

Households that rent their home had a higher than average inflation rate of 7% for those renting from a private owner and 7.3% for those renting from a local authority.

Price increases have remained relatively stable for the last number of years, and until 2021, inflation had not increased by more than 2% since 2011.

While prices decreased during most of 2020, inflation has been increasing since April 2021. In July 2021, annual inflation was 2.2% and the rate of inflation continued to rise for the rest of the year, reaching 5.5% in December.

So far this year, the annual rate of inflation hit 5% in January, 5.6% in February and 6.7% in March 2022. The latest figure is 7% for the year to April.

The CSO also noted that higher than average inflation was observed for households of one adult (7.7%), one adult with children (7.2%) or two adults without children (6.9%).

Speaking on RTÉ’s News at One, Barra Roantree, an economist with the ESRI said that while the impact of inflation is “bad for all of us”, these figures show that it is being particularly hard felt by those on the lowest incomes, and also those in rural areas and in older households.

He said lower income households spend a “much larger share” of their overall budgets on basic necessities like fuel and heating.

“We know also that lower income households tend to have smaller levels of savings, so they have fewer financial buffers to dig in to, particularly if this is a longer-term issue,” he said.

“That really is compounding the problem and is going to put a huge challenge on Government in the months ahead as they decide what groups they’re going to prioritise in terms of protecting from the impacts of inflation.”

Mr Roantree said the situation in Ukraine is going to be “one of the key things driving this”.

“And until that is settled, we’re going to continue to see much of the patterns that we have been seeing over the past few weeks and months,” he added.

Article Source – Inflation hitting lower income households harder – CSO – RTE

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