Energy bills will fall by 7% in July – the first drop for a year – providing some relief to hard-pressed households.
The annual average bill for gas and electricity will fall by £129 under the new price cap announced by the energy regulator Ofgem.
The quarterly cap sets a maximum that suppliers can charge for each unit of energy, affecting 22 million households in England, Scotland and Wales.
Ofgem’s announcement came as a new survey suggests consumers are more optimistic about their finances and the state of the economy despite rises in taxes and the impact of trade tariffs.
Market research company GfK said its monthly survey of household sentiment showed household sentiment gained three points in May.
Consumers were more upbeat about their personal financial situation over the next 12 months and there were also gains in sentiment about the prospects for the economy.
Confidence returned to buying big ticket items such as furniture which usually take a back seat when the mood is low.
Neil Bellamy, consumer insights director at GfK, said inflation fears “have not disappeared but the consumer mood in the UK does appear to have improved a little”.
The figures coincide with figures from the CBI showing the manufacturing sector suffered another sharp decline in output.
Ben Jones, lead economist at the CBI, said factories were battling “high energy costs, rising labour costs and the threat of extra regulation with the Employment Rights Bill coming down the track”.
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