British energy bills could hit £3,363/year in JanuaryThe British household energy bill price cap could surge to above £3,300 per year next January, analysts at Cornwall Insight have warned.
New, higher forecasts from Cornwall Insight show that the price cap is on track to rise to £3,244 a year in October, when it is next adjusted.
That’s up from £1,971 per year at present, and would be an extremely tough blow for struggling households.
And under regulator Ofgem’s new quarterly cap changes, Cornwall estimates the Default Tariff Cap would rise again, to £3,363 per year, for January-March 2023.
Just last month, Cornwall had calculated the cap would rise to £3,003 for the January to March period, but the latest energy price moves suggest it will be higher.
Ongoing uncertainty regarding Russian gas flows into continental Europe, as well as more recent concerns such as the halted strike by Norwegian gas workers, have led to an increasingly volatile energy market, Cornwall says.
That leads to a rise in wholesale energy prices – which ultimately trickles down to consumers.
These predictions do not include the impact of the government’s Energy Bills Support Scheme, which will give a £400 grant to households in October.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
“As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer Default Tariff Cap rise to what are even more unaffordable levels.
“There is always some hope that the market will stabilise and retreat in time for the setting of the January cap. However, with the announcement of the October cap only a month away, the high wholesale prices are already being “baked in” to the figure, with little hope of relief from the predicted high energy bills.
“Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts. However, as it stands, energy consumers are facing the prospect of a very expensive winter.”
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Seema Shah, chief strategist at Principal Global Investors, also sees another hefty increase in US interest rates this month… which could push the economy close to recession.
“Today’s job number should soothe fears of an imminent recession, but it does nothing to relieve fears of considerable further Fed tightening. The job market remains severely tight, suggesting still-intense wage pressures. How can the Fed do anything other than persisting with rapid policy tightening? A 0.75% increase is still on the cards for July.
“In recent weeks, markets have become increasingly fearful that recession is around the corner. But with payrolls above 350,000, this is an economy that is still well-supported by a strong labour market.
Yet, cracks are undoubtedly forming and, with the Fed determined to contain inflation pressures, monetary tightening will only prompt economic activity to decelerate further over the coming months.
Recession is not upon us, but it’s not too far away.”
Jobs report could solidify another 75bp rise from the FedThe strong 372,000 gain in non-farm payrolls in June appears to “make a mockery” of claims the US economy is heading into, let alone already in, a recession, says Andrew Hunter, Senior US Economist at Capital Economics.
That’s clearly good news. Except it may spur the US Federal Reserve into a massive 75bp increase in interest rates this month, for the second month running, putting more pressure on borrowers.
Hunter explains:
That may be enough to solidify the case for another 75bp rate hike at the Fed’s meeting later this month, although signs that wage growth is cooling and the recent plunge in commodity prices both suggest the inflation outlook could improve more quickly than officials had feared.
Today’s strong US jobs report contrasts with other recent economic announcements, points out Richard Flynn, managing director at Charles Schwab UK:
The US economy and the stock market have both struggled in the first half of 2022, in the face of risks that include a multi-decade high in inflation, aggressive monetary policy tightening, and the effects of Russia’s invasion of Ukraine. For now, the jobs market appears unimpacted by these risks. However, jobs reports are lagging economic indicators that are often strong entering a downturn.
Despite today’s good news, stocks are likely to continue to feel the weight of monetary tightening, shrinking liquidity, and slower economic growth.”
Average earnings paid to US workers are still lagging behind inflation, today’s jobs report shows, despite rising last month.
In June, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3%, to $32.08.
Over the past 12 months, average hourly earnings have increased by 5.1%, which is down from 5.3% a month ago (but a little higher than forecast).
That doesn’t keep pace with rising prices, as consumer price inflation jumped by 8.6% in the year to May.
Average hourly earnings +5.1% y/y vs. +5.0% est. & +5.3% in prior month (rev up from +5.2%) … earnings +0.3% m/m vs. +0.3% est. & +0.4% in prior month (rev up from +0.3%) pic.twitter.com/hmJXmCkdfZ
— Liz Ann Sonders (@LizAnnSonders) July 8, 2022 June’s jobs gains means the US economy is closing in on its pre-pandemic employment levels.
Total nonfarm employment is down by 524,000, or 0.3 percent, from its pre-pandemic level in February 2020, the BLS says.
Private-sector employment has recovered the net job losses due to the pandemic and is 140,000 higher than in February 2020, while government employment is 664,000 lower.
You might remember that in April 2020, more than 20m Americans lost their jobs in the first pandemic lockdowns.
The US Bureau of Labor Statistics says there were notable job gains in professional and business services, leisure and hospitality, and health care last month.
That includes:
Professional and business services employment growing by 74,000 in June. Leisure and hospitality added 67,000 jobs, as growth continued in food services and drinking places (+41,000). However, employment in leisure and hospitality is down by 1.3 million, or 7.8 percent, since February 2020. Employment in health care rose by 57,000 in June In June, transportation and warehousing added 36,000 jobs Employment in manufacturing increased by 29,000 in June and has returned to its February 2020 level. Information added 25,000 jobs in June, Employment in social assistance rose by 21,000, but is down by 87,000, or 2.0 percent, since February 2020 Wholesale trade added 16,000 jobs in June, including 8,000 in nondurable goods. Mining employment rose by 5,000 in June, US economy added 372,000 jobs in JuneAmerica’s economy has added more new jobs than expected last month.
Non-farm payrolls rose by 372,000 in June, beating forecasts of a 268,000 increase in jobs, which may show the labor market is holding up better than economists feared.
That’s only slightly lower than May’s 384,000 new hires.
The unemployment rate held steady at 3.6%, which also indicates the US economy could be defying recession worries even with inflation at 40-year highs.
WASHINGTON (AP) — US added 372,000 jobs in June in sign of economic resilience as unemployment remains a low 3.6%.
— Ken Thomas (@KThomasDC) July 8, 2022 As Matilda Long of Yahoo News points out, energy bills will hit alarming levels this winter — meaning some people simply won’t be able to keep warm.
The latest energy price cap predictions from Cornwall Insight are honestly pretty terrifying.
Q4 2022: £3,244.54
Q1 2023: £3,363.70
Average this winter of £3,304.12 pic.twitter.com/ByeYewJN9x
— Matilda Long (@tilda_long) July 8, 2022 UK households are also facing sharp rises in car insurance, on top of record fuel prices when they fill up.
Over the first five months of 2022, the average motor insurance premium increased by 7.8%, according to Consumer Intelligence today, with the typical policy now costing £786.
The report also found that:
Older drivers continue to be stung by higher car insurance premiums – with increases of 9.4% over the past year for drivers aged over 50, bringing their average annual premium to £414. For motorists aged 25-49, prices have risen by 6.4% over the same 12-month period – with the annual cost of car insurance now £592. Younger drivers aged under 25 – who are statistically more likely to have an accident – typically now pay £1,669 for their car insurance, a fall of 3.2% in the last 12 months. Here’s some early reaction to Cornwall Insight warning that the energy price cap is heading over £3,300 in January, from Graham Hiscott of the Daily Mirror:
We might be in a heat wave now but experts at Cornwall Insight is predicting average energy bills will top an eye watering £3,200 a year from October, and more than £3,300 from January.
— Graham Hiscott (@Grahamhiscott) July 8, 2022 If they’re right (and very good chance they are) average household will be shelling out £270 a month energy. That average will have rocketed by neigh on £2,000 a year in the past 12 months. These kind of increases were once the stuff of nightmares.
— Graham Hiscott (@Grahamhiscott) July 8, 2022 Here’s Gary Caffell of Money Saving Expert:
Just had a shocking and scary new energy price cap prediction from @CornwallInsight… £3,244/yr for a typical home from Oct – a 65% hike. Rising again to £3,363/r from Jan. A lot higher than the £2,800 prediction when energy support packages were announced in May. Ouch
— Gary Caffell (@GCaffell) July 8, 2022 Here are those new forecasts:
Cornwall Insight’s latest energy price cap forecasts Photograph: Cornwall InsightBritish energy bills could hit £3,363/year in JanuaryThe British household energy bill price cap could surge to above £3,300 per year next January, analysts at Cornwall Insight have warned.
New, higher forecasts from Cornwall Insight show that the price cap is on track to rise to £3,244 a year in October, when it is next adjusted.
That’s up from £1,971 per year at present, and would be an extremely tough blow for struggling households.
And under regulator Ofgem’s new quarterly cap changes, Cornwall estimates the Default Tariff Cap would rise again, to £3,363 per year, for January-March 2023.
Just last month, Cornwall had calculated the cap would rise to £3,003 for the January to March period, but the latest energy price moves suggest it will be higher.
Ongoing uncertainty regarding Russian gas flows into continental Europe, as well as more recent concerns such as the halted strike by Norwegian gas workers, have led to an increasingly volatile energy market, Cornwall says.
That leads to a rise in wholesale energy prices – which ultimately trickles down to consumers.
These predictions do not include the impact of the government’s Energy Bills Support Scheme, which will give a £400 grant to households in October.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
“As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer Default Tariff Cap rise to what are even more unaffordable levels.
“There is always some hope that the market will stabilise and retreat in time for the setting of the January cap. However, with the announcement of the October cap only a month away, the high wholesale prices are already being “baked in” to the figure, with little hope of relief from the predicted high energy bills.
“Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts. However, as it stands, energy consumers are facing the prospect of a very expensive winter.”