New CSO paper shows how inflation impacts different households

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The Hard Shoulder with Ciara Kelly and Shane Colman on Newstalk with Ciara.

Shane Coleman (1:08)

Now let's turn to those CSO figures today.

A paper estimating the inflation or how the inflation rate affects different types of households in Ireland, depending on age, household composition, income and other characteristics. Here to go through the findings and what they mean is Emma Howard, economist at TU Dublin. Emma, I think that the standout stats are finding in this report is that young people are disproportionately impacted by inflation. Tell us in what way and why that is.

Emma Howard (1:42)

Yeah, so that is the group with the highest average rate of inflation.

If you look at the overall headline to the last 12 months to September this year, and it's slightly higher than average and the highest of all groups for those under 35, that's 4.4% is their inflation rate. That really boils down to two things, because if we think about how inflation is measured, that headline measure is based on a basket that contains 615 items that are bought by households in Ireland, and the CSO each month gathers over 50,000 prices across the country of all of those items, and then calculates an average. But of course, different people buy different items in that basket, and nobody probably buys all of them. So those rates differ across individuals. And the biggest factors that are impacting younger people more than those households that might be headed by an older person is really, number one, rent, so the increase in rent over the past year, and restaurants and hotels category, which includes bars and takeaways, where we've seen those prices increase. And of course, those people under 35 will probably spend more time in bars and eating out in restaurants than, unfortunately, probably people like you and I do, Shane.

Shane Coleman (3:06)

True enough. I was kind of surprised by this finding, Emma. Households with children had a lower estimated inflation rate compared to households without children.

Emma Howard (3:19)

They did. And, yeah, it does seem kind of counterintuitive in a way because, of course, you know, once you have children in your household, you might think that just adds to the expenses. But I think there's probably a number of factors contributing to that. So one of the things in the data as well is that one adult households faced a higher rate of inflation than two adult households, because, I guess, down to their purchasing and the economies of scale, it's sort of cheaper to pay for two adults than one. And those households with children, predominantly, obviously not all, but would be more likely to have two adults in them. The other factor that we see there is that households with children are more likely to be older households. And as we just said, there are older adult headed households. And those younger adults have higher rates.

And we see that there is less spending in bars and restaurants by those households who have children.

Shane Coleman (4:29)

OK. I'm presuming, I mean, do things like free school books, for example, free school lunches, do they have a factor?

Emma Howard (4:38)

Yeah, there's also, yeah, there's possibly. So if you look at the food and non-alcoholic beverages, we don't see any kind of difference in the inflation rates between those two households. But certainly you would imagine things like the free school meals being extended, the free school books and then some other supports that are paid to households with children, you know, things like the universal children's allowance and perhaps working family payments to households with children and so on, may well be helping to cushion some of those impacts for those households.