Ageing UK households’ impact on growth

Uncategorized

SHARE THIS STORY

My new post for the Financial Times FT Data blog highlights how household spending is very dependent on age.

Guest post by Paul Hodges| Jan 29 11:28 |
The UK’s ageing population is creating major headwinds for economic growth, data published last month by the Office of National Statistics shows.
The issue is simple: the ageing of the Baby Boomers means most UK households are now headed by someone more than 50 years old. On average, these households spend almost 20 per cent than less those headed by younger people. Consumer spending is around two-thirds of GDP, and so this ongoing shift in spending patterns is inevitably impacting the economic outlook.Two key facts provide the necessary context. One is that the majority of UK households have been headed by someone more than 50 years old since 2002. The second is that average household expenditure (in £2013) has now been in steady decline since 2006.

This chart highlights how these trends have developed:

UK household spending

The majority of UK households are now headed by someone aged over-50. In 2013, there were 14.6 million in this segment, compared to just 12.3 million headed by the under-50s. These older households spend less that younger ones. Average spend by those in the older age group was just £24k in 2013, compared to the £30k averaged by the under-50s. As a result, total spending by the larger segment of 50+ households at £354 billion was slightly less than the smaller, younger segment’s $368 billion.

These trends seem likely to continue. The ongoing decline in fertility rates continues to reduce the size of the highest-spending cohort, those aged 30-49. Their numbers have fallen from 9.8 million in 2000 to 9.6 million in 2013. At the same time, increasing life expectancy has led to an increase in the size of the 50-64 age group from 6.2 million to 7.1 million over the same period. Even more remarkably, the number in the very low-spending 75+ cohort has jumped by almost a quarter to 3.6 million, and their average spend is less than half of the 30-49 cohort.

Chart: Spending by age and category

This chart highlights how spending declines across all major categories past the age of 50. Peak spending takes place in the 30-49 cohort, when people are settling down, often starting a family, and seeing their careers and earnings develop. But after 50, spending reduces as the children leave home and their incomes decline as they enter retirement.

The two largest areas, housing and transport, see an immediate decline as people move into their 50s. In others, such as recreation and food & drink, the decline is delayed until they reach 65+. Overall, total spend by the 50-64 cohort averages 93 per cent of peak spending, whilst spend by the 65+ cohort is only three-quarters of the peak.

It is hard to see how these trends can be mitigated by policymakers. Today’s 65-year-olds now benefit from an extra decade of life expectancy compared to 1950, when they were born. But no political party is likely to go into May’s general election with a promise to immediately increase retirement age by 10 years to balance this.

The ONS data thus highlights the major challenge faced by policymakers, as they seek to restore economic growth to the SuperCycle levels seen when the Baby Boomers were in their prime spending years.

Paul Hodges is the co-author of Boom, Gloom and the New Normal: How the Western Baby Boomers are Changing Demand Patterns, Again. www.new-normal.com

PREVIOUS POST

BMW says China's auto sales are heading into a New Normal

29/01/2015

Its amazing what a lending bubble can do in the short-term, as the above chart s...

Learn more
NEXT POST

The world of $100/bbl oil is unlikely to return

02/02/2015

Chemical markets are continuing to signal that the world faces major economic c...

Learn more
More posts
The Top 5 pandemic paradigm shifts
28/06/2020

The Covid-19 pandemic has accelerated the fundamental changes which were already underway in global ...

Read
Oil prices start to reconnect with coal and gas
21/06/2020

Oil prices are finally starting to reconnect with other fossil fuel prices, as the chart shows.  It...

Read
Economic risks rise as the lockdowns end
14/06/2020

It is now 13 years since I wrote the first post here, in June 2007. A lot has happened since then: ...

Read
World moves from Denial to Anger, as the Paradigm of Loss moves forward
07/06/2020

I have been warning about the Covid-19 risk since early February, and in April suggested here that: ...

Read
The New Normal for global industry
31/05/2020

The global chemical industry is the third largest sector in the world behind agriculture and energy,...

Read
Hertz goes bankrupt as non-essential consumer demand disappears
24/05/2020

The US Federal Reserve has now spent $7tn bailing out Wall Street. But it couldn’t save the 10...

Read
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
Smartphone sales head into decline as affordability becomes key
10/05/2020

The smartphone sales decline accelerated in Q1, as Strategy Analytics report: “Global smartpho...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more
X

Uncover exclusive industry upates from ICIS

Interested to uncover more articles related to this topic? Explore additional news, insights and intelligence, tailored to the markets you are interested in by accessing exclusive content from ICIS.com

DISCOVER MORE