Millennials face twice the inflation rate versus pensioners

Sad millennial

Millennials - those aged 25-34 years - face at least twice the inflation rate of older generations, according to new research from Fidelity.

In the 12 months to June 2016, the annual rate of inflation for millennials stood at 0.8%, compared to 0.4% for generation X, baby boomers and those over 65 and 0.3 for those over 75. Overall, the national average was 0.5% in June.

Rent is one main culprit because millennials spend almost a fifth (19%) of their income on rent and bills, which is more than any other generation.

The research further indicates that the increased cost of living is largely driven by this millennials' spending choices. While this generation only spends 8% of their income on food and drink in supermarkets where prices are falling, they spend 14% and more on eating out.


Inflation gap is narrowing

Tom Stevenson, investment director for personal investing at Fidelity International, says: "The average inflation rate for the UK stands at 0.5%. But if you look at what lies behind this headline figure, you will find that each age group feels the effect of inflation differently.

"For the last two years it has been young people who have borne the brunt of the rising cost of living. The upward pressure comes largely from their spending on eating out, rent and bills."

At the same time, millennials don't benefit from the year-on-year drag on inflation which comes from cheaper food prices and non-alcoholic beverages, because they spend far less on grocery shopping and eating in.

But as many millennials would attest, eating out only makes sense when the alternative is cooking a meal in a cramped flat share.

"There are signs, however, that the inflation gap between generations is narrowing as increasing costs of healthcare and cultural experiences are starting to put pressure on older generations," adds Stevenson.


This story was originally written for our sister magazine, Money Observer.