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Consumers reveal the truth about UK Inflation

ConsumerWatch / UK Economy Mar 27, 2007 - 04:38 PM GMT

By: Fool.co.uk

ConsumerWatch

The Government grossly underestimates inflation figures according to new findings of an online survey* by independent personal finance website Fool.co.uk

Consumers say inflation is 7.4% not 2.7%

  • Inflation hurts older people most
  • Men and women feel the affects of inflation differently
  • Yorkshire experiences the lowest rate of inflation

According to almost 1,500 Fool.co.uk readers, the Government's inflation figures are wrong. An overwhelming 90% of people believe that inflation in the UK is running at well above the Government's figure of 2.7%. On average consumers reckon that a more realistic figure for annual inflation is 7.4%.

Over two-thirds of respondents said that in their estimation, the true rate of inflation is in the region of 4% to 9%. Worryingly, 1 in 4 people said their household inflation is more likely to be 10% to 15%!

The survey also showed a small, but nevertheless significant, gender divide on how inflation affected households. In the main, women felt that household inflation is running at 7.9%. However, men reckon that the rise in the cost of living is around 7.1%.

Inflation affects people of varying ages differently. The youngest group of respondents, those aged between 18 and 25 years, said inflation is 5.9%. However, older respondents claim inflation is much worse. For 26 to 33 year-olds inflation is 6.8%, and for 31 to 41 year-olds it is 7.4%. Anyone older than 42 feels the impact of inflation at a slightly higher rate of 7.6%.

Across the UK, average household inflation was found to be tightly clustered around 7.4%**. However, households in Northern Ireland and East of England revealed that inflation is around 7.7%. Yorkshire fared best though. It was the only region in the survey that felt inflation is below 7%.

David Kuo, Head of Personal Finance at Fool.co.uk comments: “Our survey on the impact of inflation on households across the UK confirms what many consumers already know – that the cost of living is rising faster than the Government admits.

“What's more, 1 in 4 people think that inflation is as high as 10% to 15%. This suggests that the Government's inflation figures are at best questionable, and at worst downright deceptive.

“When assessing their own finances, consumers simply want to know whether their monthly paycheck buys as much today as it did a year ago – and our survey reveals it doesn't!”

“The most worrying finding was the level of inflation felt by the oldest group of people. This group represents some of the most vulnerable people in society, who may have given up work, and rely on accurate Government figures to ensure that their pensions keep pace with inflation. It seems they may have been badly let down!”

David adds: “If you are a mortgage-paying, university-fee paying, council-tax paying, congesting charge-paying car driver, then be aware that your pay rise will probably not cover the rise in your monthly outgoings.

“However, if you are a chicken-kiev-munching, MP3-downloading, flat-panel TV-watching, cheap-champagne-guzzling consumer who buys orange juice by the multi-pack, then perhaps the Government's inflation figures may be of some benefit to you.”

By Sonia Rehill
soniar@fool.co.uk
http://www.fool.co.uk


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