Business Irish

Saturday 21 October 2017

The squeezed middle feels more pain from harsh price rises

COST OF LIVING SURVEY Business Editor Nick Webb reveals who is being strangled by price rises – and who is seeing things improve dramatically

Nick Webb

Nick Webb

THE official figures indicate that the cost of living has barely budged over the past year. But tell that to those people struggling to pay bills or wondering why they can't afford to go out this weekend.

Over the past year, the change in the cost of living for professionals like accountants or lawyers is far different to pensioners or young families. Some parts of society are doing quite nicely indeed, while others are being absolutely crushed by rising prices. The Sunday Independent/KBC Cost of Living Survey tracks these changes.

SQUEEZED MIDDLE

Up 2.2 per cent

National average up 0.5 per cent

The long-suffering 'squeezed middle' is included in the Sunday Independent/ KBC Cost of Living survey for the first time.

The so-called 'squeezed middle' are those sandwiched between the new poor and the few remaining wealthy people in the country. These are the folks who were financially comfortable during the boom but who have now been slowly smothered by rising taxes and falling incomes.

Their cost of living has risen by 2.2 per cent over the past year – more than four times the national average.

They may find it hard to believe the official inflation data – because they haven't seen anything like the drop in the cost of living experienced by others in the past few years. That's mainly because their mortgages are just paid off, so they aren't getting relief from falling rates. Spiralling bills for third-level education – up 6.6 per cent – are a thumping financial headache. And private health costs rose by 12.5 per cent over the past year.

While fuel costs have dipped back, transport bills have upped sharply, with motor tax up 9.9 per cent and other vehicle-running costs up 2.2 per cent.

Going out to restaurants isn't really a runner any more, so escape is limited. Book prices have risen by 2.6 per cent. However, at least there's the garden, with flowers, plants and other gardening items wilting by 7.9 per cent.

RENTERS

Up 2.7 per cent

National average up 0.5 per cent

People living in rented accommodation have been hammered by rising living costs over the past year, with their expenses rising at more than five times the national average. Spending power has been badly dented by the 5.6 per cent jump in rents over the past year. Increased bus fares (up 10 per cent) have also socked it to them. Escaping to the sun is also less compelling value, as air travel is now 6.6 per cent more expensive.

However, heading in to H&M or Penneys for a new outfit is cheaper, as clothes prices have dipped 2.7 per cent. There are also major savings for superwoofer sound systems and other electrical equipment, which have shed 13 per cent over the past year.

PENSIONERS

Up 1.5 per cent

National average up 0.5 per cent

Pensioners have seen their living costs rise at three times the national average. This is because they haven't benefited from the falling mortgage interest costs or the huge savings to be made getting a new games console for Fifa 13 or Call of Duty.

The 1.5 per cent increase in food prices has helped empty their pockets. Potatoes are up an unprecedented 36 per cent, with preserved fruit up 9 per cent. Tinned sardines taste like gack and they are also 10.7 per cent pricier than last year. Cigarettes and tobacco are also dearer, rising by up to 7.2 per cent. Spirits are up, too. But only in a bad way. Gin or whiskey is 6.7 per cent more expensive than in May 2012.

The endlessly rising cost of electricity – up 5.8 per cent while gas rises 7.7 per cent – have impacted on the spending power of the grey pound. Even shopping around for better value has hidden costs, with shoe repairs now 0.5 per cent dearer.

Upwardly mobile middle classes

Down 2.9 per cent

National average up 0.5 per cent

Things are improving for the professional classes, as their cost of living has fallen the most of all our categories.

The principal reason for this is that mortgage interest payments on the vast redbrick in Ranelagh have fallen sharply – down 8.4 per cent. Given that mortgage repayments are such a huge part of the monthly outgoings, this represents a major, major saving.

Food costs have risen 1.5 per cent, with trips to posh grocery stores Donnybrook Fair or Fallon & Byrne feeling pricier. Olive oil is 0.9 per cent dearer, with organic beef up 2.6 per cent. Artichokes, celeriac and other trendy vegetables are now 2.4 per cent pricier too. However, tiger prawns and other fresh or chilled seafood is slightly cheaper.

Sending young Fiachra to Clongowes or Blackrock may be more of a stretch, as second-level education is 2.5 per cent dearer.

Driving into work at KPMG or another professional services firm is cheaper, with new cars costing 2.6 per cent less. The 132 plate will look amazing in the drive, just wait until the neighbours see it. Sticking on the lycra and jumping on the bike for a Sunday cycle has marked time, with bike prices flat over the year, having dropped 0.4 per cent since April.

Healthcare costs are savage, with top-notch health insurance rising 12.5 per cent. Stress is rampant in the rat race and more expensive to deal with, as prescribed drugs are up by 6.6 per cent.

Looking good is less easy because hairdressing bills are up 0.8 per cent, with beauty treatments rising 0.6 per cent. Dental fees are up by the same amount.

Entertainment also costs more, with restaurant prices up 2 per cent. Theatre and other cultural admittance fees have jumped 21.2 per cent but sports club membership is 1.2 per cent cheaper.

STAY AT HOMES

Down 0.2 per cent

National average up 0.5 per cent

Those living at home with their parents have seen their inflation rate remain below the national average for most of the past three-and-a-half years. Indeed, the cost of living for this group has been falling through the early months of 2013.

Major savings have come from cheaper phones (-8.3 per cent), laptops (-18.8 per cent) and games and hobbies (-4.2 per cent). The stay-at-homers have also benefited from cheaper skinny jeans, as clothing costs are down 2.1 per cent. Snappier sunglasses and other accessories are down 2.6 per cent, while winklepinker boots and other footwear is 4.6 per cent cheaper. The Oompa Loompa look is also more easily attainable with cosmetic prices falling 3 per cent.

Going out costs more, though, as rail and bus fares have risen. Taxi fares are flat. Booze is dearer, with beer up 0.3 per cent; but wine has risen a hefty 6.9 per cent. Going to see the latest Superman movie is 0.2 per cent dearer than last year but at least nightclubs are 4.8 per cent cheaper. Finding out about Selena Gomez's latest squeeze (or, indeed, who Selena Gomez is) has got a little more expensive, with gossip and other magazines up by 0.5 per cent.

YOUNG FAMILY

Down 1.3 per cent

National average up 0.5 per cent

The typical young family may appear to be up against it all the time but things are actually getting much better with a sizeable enough drop in the cost of living over the past year.

The key element in this has been the impact of lower borrowing costs, which have fallen 8.4 per cent. Cheaper motor fuels (-5.3 per cent) and a 2.6 per cent drop in people carriers and other car prices have also helped. Suiting and booting all the little terriers is cheaper, too, with clothing and footwear prices falling by 2.7 per cent. Sportswear and equipment is cheaper, down by 1.3 per cent.

However, the extraordinary 5.4 per cent hike in insurance, coupled with some hefty increases in family food bills, have taken back some of the gains. Breakfast cereal is up by 6.7 per cent with fishfingers and other processed fish up over 10 per cent. There has also been a 4.7 per cent increase in crisp prices, as well as a 2.9 per cent jump in the cost of baby food. Fruit juice is 1.6 per cent dearer. On the plus side, pork is 2.6 per cent cheaper and fruit is 0.3 per cent down.

FIRST-TIME BUYER

Down 2.9 per cent

National average up 0.5 per cent

The average first-time buyer has seen house prices begin to stabilise in the past 12 months and has seen some downward pressure on their typical living costs, too.

The drop in ECB interest rates has been a crucial saving, as have the significant falls in the cost of furniture, which is down 7 per cent. Soft furnishings are down 6 per cent, with floor coverings and rugs 2.6 per cent down. Household appliances are also cheaper by 2.1 per cent.

Weekends still revolve around a bit of DIY and fixing up the new house. Paint is around 2.6 per cent cheaper, while tools are 4.6 per cent less expensive.

But badly done DIY often leads to rising doctors' bills – and medical charges are up by 0.2 per cent.

Irish Independent

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