Impact of inflation on different household types

The official measure of inflation as published in the CPI shows that prices for consumer goods and services rose by 6.4% from September 2022 to September 2023. Over the same period, estimated annual rates of inflation by income decile ranged from 6.0% for lower deciles by income (first, and third) to 6.9% per annum for the highest decile (tenth).  Looking at the five years from September 2018 to September 2023, overall inflation as measured by the CPI was 19.1% while estimated inflation by income deciles show a range from 18.5% for higher income households to 20.5% for lower income households. The lowest income decile experienced an estimated price increase of 20.0% over those five years, while the highest income decile experienced a rise of 18.7%.  The latest publication in the CSO Frontier Series gives an outlines of the impact of inflation on different households types.  

September 2022 - September 2023

Mortgage Interest Payments and Restaurants & Hotels were the largest drivers of inflation in the 12 months to September 2023. Mortgage Interest Payments price changes were responsible for more than one-fifth of the annual change in the CPI (1.4 percentage points of the 6.4% annual increase) while Restaurants & Hotels contributed another fifth of the change (1.3 percentage points).  In the 12 months to September 2023, household groups which were estimated to have experienced inflation at a higher rate than the official measure of inflation of 6.4% included:

• Households where the dwelling is owned with a mortgage (7.8%);
• Higher income households with estimated rates of inflation of up to 6.9%;
• Households containing only one adult (6.8%);
• Households containing two adults with more than three children, or households containing three or more adults with children (6.8%);
• Households containing two adults and one to three children (6.7%);
• Households where the reference person is aged 35 to 64 years (6.7%);
• Households containing two adults and no children (6.5%);
• Urban households (6.5%).

Inflation September 2022 - September 2023

Mortgage Interest Payments and Restaurants & Hotels were the largest drivers of inflation in the 12 months to September 2023. Mortgage Interest Payments price changes were responsible for more than one-fifth of the annual change in the CPI (1.4 percentage points of the 6.4% annual increase) while Restaurants & Hotels contributed another fifth of the change (1.3 percentage points).

• For households in the lowest decile (the lowest 10% by income): Electricity, Gas & Other Fuels and Rent were the joint largest contributors to their estimated inflation rate (each 1.3 percentage points of 6.0%). These were followed by Food & Non-Alcoholic Beverages (1.0 percentage points).
• For households in the top income decile: Mortgage Interest Payments was the largest contributor to their estimated inflation (2.2 percentage points of 6.9%) followed by Restaurants & Hotels (1.6 percentage points).
• For households where the dwelling is owned with a mortgage: Mortgage Interest Payments was the largest contributor to their annual inflation (3.4 percentage points of 7.8%), followed by Restaurants & Hotels (1.4 percentage points).
• For households renting from a local authority: Rent was the largest contributor to their annual inflation (1.3 percentage points of 5.9%), followed by Electricity, Gas & Other Fuels (1.2 percentage points), and Food & Non-Alcoholic Beverages (1.1 percentage points).
• For households renting privately: Rent made the largest contribution to their annual inflation (2.1 percentage points of 5.3%), followed by Restaurants & Hotels (1.1 percentage points).
• For rural households: Mortgage Interest Payments contributed 1.4 percentage points to their annual estimated inflation of 6.3%, while Restaurants & Hotels contributed 1.2 percentage points.
• For urban households: Annual estimated inflation for urban households was 6.5%, with Mortgage Interest Payments contributing 1.4 percentage points and Restaurants & Hotels contributing 1.3 percentage points.
• Where the household reference person was aged under 35, annual inflation was estimated at 5.8%. The main contributors were Rent (1.5 percentage points), and Restaurants & Hotels (1.3 percentage points).
• The main contributors to the estimated inflation for households where the reference person was aged 35 to 64 years were: Mortgage Interest Payments (1.8 percentage points out of the total of 6.7%) and Restaurant & Hotels (1.3 percentage points).

Inflation over a five year period: September 2018 - September 2023

Over the period September 2018 – September 2023, overall inflation as measured by the CPI was 19.1% while estimated inflation by income deciles show a range from 18.5% for higher income households to 20.5% for lower income households. The lowest income decile experienced an estimated price increase of 20.0% over those five years, while the highest income decile experienced a rise of 18.7%.  

Households with lower equivalised gross household income have lower estimated inflation than the CPI in the last 12 months while households with higher equivalised gross household income have higher estimated inflation than the CPI. Estimated rates of inflation from September 2022 to September 2023 by income decile ranged from 6.0% for lower deciles (first and third) to 6.9% for the highest decile (10th). 

In the five years to September 2023 the opposite relationship was observed where households with lower equivalised gross household income had a higher estimated inflation than the CPI over the last five years while households with higher equivalised gross household income have lower estimated inflation than the CPI. For example, for households in the lowest income decile the estimated inflation in the last five years was 20.0%, compared with 18.7% for the highest income decile. Estimated rates of inflation from September 2018 to September 2023 by income decile ranged from 18.5% for an upper decile (eighth) to 20.5% for one of the lower deciles (second).  (See table 1)

Contributors to inflation 2018-2023

Over the five-year period from September 2018 to September 2023, Rent, and Electricity, Gas & Other Fuels have together been the biggest contributors to inflation for households with lower gross household income (first to fourth deciles). Electricity, Gas & Other Fuels, and Restaurants & Hotels have been the biggest contributors to inflation in the last five years for households with higher gross household income (fifth to eighth deciles). Those two contributors along with Transport are the three highest contributors to inflation for the highest income deciles (ninth and tenth). High inflation for Rent and for Electricity, Gas & Other Fuels has the effect of increasing the estimated difference in inflation between households with lower and higher incomes. High inflation for Restaurants & Hotels and for Transport has the effect of reducing this estimated inflation gap.

Household Tenure

The CSO data shows that households that own their house with a mortgage (19.9%) or those that rent their accommodation from a local authority (19.8%) had higher estimated inflation than households that own their home outright (18.1%) or those that rent from a private owner (18.8%). Inflation for households with a mortgage has been higher than for households that own their home outright in both the last five years and in the last 12 months.

Household Composition

Households of one adult (without children) had the highest estimated inflation in the five years since September 2018 (21.1%).  Between September 2022 and September 2023, households of one adult (without children) and other households with children (households containing two adults with more than three children, or households containing three or more adults with children) had the joint highest rate of estimated inflation (6.8%).  Over the five years since September 2018, Rent was the biggest contributor (6.4 percentage points of 20.3%) to estimated inflation for households of one adult with children. For households containing three or more adults without children, Restaurants & Hotels was the largest contributor to five-year inflation (4.1 percentage points of 17.7%) while Electricity, Gas & Other Fuels was the biggest contributor to estimated inflation for all other household compositions.

Household Location

There was no difference between estimated inflation for Urban and Rural households in the five years since September 2018 (both 19.1%). In the year to September 2023.  There are differences in what has been driving those changes. The main differences in the factors contributing to Urban and Rural inflation over that period were Rent (2.7 percentage points contribution to urban inflation, only 0.5 percentage points contribution to Rural inflation), and Transport (2.1 percentage points contribution to Urban inflation, 3.8 percentage points contribution to Rural inflation).  In the 12 months to September 2023, Mortgage Interest Payments was the biggest contributor to estimated inflation for both Urban and Rural households.