As well as cutting UK energy costs (see earlier), Donald Trump can also take credit for growing the German economy! New GDP data this morning shows that Germany’s GDP rose by 0.4% in January-March, twice as fast as the first estimate of 0.2% growth in the quarter. That’s the fastest quarterly growth since the third quarter of 2022. Manufacturing output and exports grew faster in March than initially assumed, as companies scrambled to beat Trump’s announcement of new tariffs in April. Ruth Brand, President of the Federal Statistical Office, says: “The reason for the slightly higher growth compared to the initial estimate was the surprisingly positive economic development in March.” “In particular, production in the manufacturing sector and exports performed better than initially expected. Carsten Brzeski, global head of macro at ING, says Trump is making “the German economy great again, for now”, adding: The German economy had its best quarterly performance since the third quarter of 2022, and the reason for it seems to be Donald Trump. As a result of the announced tariffs and in anticipation of ‘Liberation Day,’ German industrial production and exports surged in March. Net exports and private consumption drove economic activity in the first quarter, while government consumption and inventories dragged on growth. The Unite union has warned that UK energy bills will still be ‘sky high’, despite the 7% cut to the price cap in July-September. Unite general secretary Sharon Graham says: “Ofgem has lowered its cap, but our bills are still sky high and nobody has any faith left in this regulator, which allows multinational companies to extract obscene profits from our energy system. We urgently need to reverse the market madness and address the real causes of the lingering energy crisis.” British energy bills will still be around 50% higher than six years ago, even after the cut to the price cap in July. Ashton Berkhauer, energy expert at MoneySuperMarket points out that in 2019, the first year of the cap, a typical energy bill was £1,137 per year – this summer, it’ll be £1,720 per year. Berkhauer says: “The reduction in the energy price cap is welcome, if overdue, news for families across the country who have been battered by the cost-of-living crisis. However, even with this reduction, the price cap is still almost 50% higher than when it was first introduced in 20191.” “For over half a decade, British households have been saddled with some of the highest energy bills of any developed country in the world. The average UK household currently pays around 27% more for their energy than their European neighbours. So, while this latest move from Ofgem is a step in the right direction, many households will still be feeling the impact of high energy bills.” * UK energy price cap for a typical dual-fuel household paying by Direct Debit since its introduction in January 2019. From October 2022 to June 2023, the UK government implemented the Energy Price Guarantee (EPG), capping typical household bills at £2,500 per year. Donald Trump, surprisingly, can take some credit for the cut in UK energy bills this summer. Cornwall Insight (the consultancy which correctly predicted today’s 7% cut to the price cap), says wholesale energy market prices fell following the announcement of US tariffs, prompting this morning’s cut to the price cap. The fall in prices was also due to milder than average temperatures, and other calming influences on the market, such as the prospect of Europe easing its gas storage rules. Dr Craig Lowrey, Principal Consultant at Cornwall Insight, says: “This fall in the energy price cap is undoubtedly welcome news for households, offering a degree of relief at a time when many are grappling with high living costs, and rising inflation. Lower prices in the warmer months are helpful, but the real benefit could come in October. With energy use typically rising as we head into winter, any drop in bills later in the year would be especially valuable for families trying to manage the high costs in the lead up to the Christmas period. “While it’s important to celebrate the small wins, the energy market remains unpredictable. We know recent declines in wholesale prices have helped bring the cap down, but global events - from geopolitical negotiations to shifts in trade and weather - can quickly reverse that trend. Plus, even with the cap coming down, bills are still higher than what we used to consider ‘normal’, so support is still very much needed. The outlook may be improving, but we’re not out of the woods yet, and energy affordability must remain a priority.” Energy regulator Ofgem has also warned that prices ‘remain high’, despite the 7% cut to energy costs this summer which it just announced. Tim Jarvis, Director General of Markets at Ofgem, says: “A fall in the price cap will be welcome news for consumers, and reflects a reduction in the international price of wholesale gas. However, we’re acutely aware that prices remain high, and some continue to struggle with the cost of energy. “The first thing I want to remind people is that you don’t have to pay the price cap – there are better deals out there so it’s important to shop around, and talk to your existing supplier about the best deal they can offer you. And changing your payment method to direct debit or smart pay as you go can save you up to £136. “In the longer term, we need an energy system where prices are insulated from the volatile international gas market, and which ensures more stable prices and energy security. And we’re working closely with government to get the investment we need to reach our clean power and net zero targets as quickly as possible. “We’re also doing everything we can to support consumers today and pushing ahead with more changes to help consumers. This includes working on ways to support those trapped in energy debt and bringing in reforms to standing charge tariffs for this winter.” Here’s the details of the new energy price cap, just announced: Newsflash: domestic gas and electricity prices for millions of households across Great Britain will fall by 7% from July – the first drop for a year. Energy regulator Ofgem has announced that its quarterly cap on domestic gas and electricity charges would fall from July by the equivalent of £129 a year for the average home, due to the drop in wholesale energy prices in recent months. This is the first cut to the quarterly price cap in a year. The cut, to the maximum cost of a unit of electricity and gas, means a typical annual dual-fuel bill will drop to £1,720. But, there’s no cap on how high a bill can be. You can see the details from Ofgem here. Households which buy their energy through variable tariffs will see an impact on their bills when the cap takes effect in July. But bill payers could still face higher bills if they use more than the typical amount of energy. However, prices would still be higher than a year earlier, and significantly above levels seen at the start of the decade. Four years ago, for example, the price cap was set at £1,138 for an average household. Reaction to follow…. Charities fear that many households will struggle to pay their energy bills, even once the price cap is lowered this summer (update: Ofgem has confirmed bills will fall 7% this summer). Matthew Cole, CEO of Fuel Bank Foundation, warned this week: “The drop in the energy price cap from July may sound like good news, but for many people already struggling to make ends meet, it won’t go far enough. Even in summer, when heating isn’t needed as much, energy is still essential; people need it to cook meals, run a washing machine, stay clean, and keep fridges and medical equipment running. These are basic needs, not luxuries. “The cost of living is still incredibly high, and many people, especially those who are vulnerable or have low incomes, are dealing with energy debt built up over the last few years of sky-high bills. “A slight drop in prices won’t fix that. People are still being forced to make tough choices — between topping up the meter or putting food on the table. Today’s price cap announcement comes just two days after Prime Minister Sir Keir Starmer signalled a partial U-turn on cuts to pensioners’ winter fuel payments, after a backlash. Good morning. British households may learn today that energy bills will fall this summer, for the first time in a year. Energy regulator Ofgem is poised to announce its latest price cap on bills in England, Scotland and Wales this morning, at 7am, and industry analysts predict it will be cut. The cap limits how much firms can charge customers for units of gas and electricity, and is set every quarter. This time, experts are forecasting the cap will be cut for the first time in a year, due to recent falls in the wholesale gas and oil prices. That would lower the energy bills of millions of households across Britain in July-September. Earlier this week, consultancy Cornwall Insight predicted the cap will be cut by 7% – that would slash around £129 off the annual bill for a typical dual-fuel household this summer, from £1,849 under the current limits. However, it’s important to note that the cap applies to the cost of a unit of energy – there’s no cap on how large a bill a family can run up. And as Dr Craig Lowery, a consultant at Cornwall, pointed out on Monday, energy bills were still too high for many. “Prices are falling, but not by enough for the numerous households struggling under the weight of a cost of living crisis, and bills remain well above the levels seen at the start of the decade.” “The fall is also a clear reminder of just how volatile the energy market remains – if prices can go down, they can bounce back up, especially with the unsettled global economic and political landscape we are experiencing. This is not the moment for complacency.” The agenda 7am BST: Ofgem to announce latest energy price cap 7am BST: Retail sales report for Great Britain in April 9.30am BST: Latest estimate for how many UK young people are not in education, employment or training 3pm BST: US new home sales data
Author: Graeme Wearden