When your currency goes down, expect import prices to rise. It's really that simple
The fact is the currency is down about 20% +/- so it's only a matter of time before that starts to filter through to prices on the high street. Apple are the first to move in this sector but I don't think they'll be the last.
This is why all the talk of the economy "booming" (here I quote The Daily Express's headline from, I think, this morning) infuriates me. We haven't seen that much in the way of price rises yet but, when we do, consumer spending may well take a hit, and at that point the growth may begin to look less healthy (1).
(And if that happens the same goldfish-memoried newspapers will bleat about how the economy's taking a beating, as if the signs aren't already there.)
(1) Or perhaps it will balance out as exports remain strong due to the weak pound. Economics is hard.
In other words, the fall in the value of the pound has not suddenly pushed Apple's costs up by more than £300 per laptop.
The last time I ordered a non-base spec Mac from Apple, it was shipped directly from China. Same for Apple stuff ordered by friends/colleagues.
It really isn't: http://fitsmallbusiness.com/order-fulfillment-costs/
Also, Apple's costs (in USD) haven't increased. It's just that they get fewer dollars for a fixed amount of British pounds. To keep the USD they receive constant, they have to increase the price in GBP.
If the pound weakens against the dollar by 20%, that £1100 is now worth about £920. So if they put the price up to £1100, then the value that the UK company needs to submit to the US company is now £1300, and the high-street price should rise to around £1800 (£1300 + 15% UK costs + 20% tax). But the price has actually increased to £1900.
What's more, this all assumes that Apple can maintain exactly the same profit margins with increasing prices, which they can only do when there is insufficient competition. Also, if Apple were paying UK corporate taxes, their UK costs would be higher, so the currency change would have even less impact.
I'm no economist or accountant, so there's a good chance I've got something totally wrong, but on the face of it, this looks like Apple sneaking in a big price rise by abusing their dominant position. In markets where there is more competition, I expect I won't see the same kind of price rises, because the manufacturers will be forced to absorb some of the increased prices. Some price rises yes, but not 20%.
While they were nowhere near the size of Apple (total market cap was about $2 billion) their costs of operating in the UK were certainly a lot higher than 1% per unit - they were typically around 20%. I realise that Apple has astronomically large economies of scale, but they also do a lot of UK advertising and have a lot of physical stores. A lot of the costs for the firm I was working for were on things like customer service, wastage (as in fixing and replacing broken units), rates (UK local government tax on commercial properties), etc.
As a non-economist I imagine that spending would remain similar, just it's going to buy far less. Which should mean retail layoffs.
Re your footnote we seem to have a massive trade deficit, that's got to make the massive shift in the pound pretty apocalyptic for the UK economy.
The news reports that say "see everything's fine post-Brexit" are terribly foreboding as they seem to be carefully gauged propaganda, and we've not even left Europe yet and as someone noted currency hedges have protected us from major price shifts so far. To me that says someone is petrified about what's going to happen when the public notice how desperately bad this all is.
Whoever is pulling Theresa May's strings just needs to keep the lid on for a couple more months; I wonder it they can do it.
I'm starting to believe the lid will stay on indefinitely. The news about Nissan to me says they will drag their feet as much as they can, and all the "hard brexit" noise was simply for tabloids to build some political capital May didn't have.
After the vote, I was bullish that they wouldn't actually dare break away; then all the noise about hard brexit scared me; but now I'm going back to the original idea that nothing will actually happen, we'll just keep on arguing for decades until "old brexiteers" give up or die a natural death.
All the talk of a cataclysmic economic disaster and paternalistic sarcasm about not listening to economic "experts" (those same people blindsided by every crisis) before the vote was just as infuriating. Especially since a lot of it was in response to a panic over the potential of rising wages.
Plus, those people don't seem to realize that there's basically a two tier economy in the UK. The macbook buying, riviera-holidaying, large-retirment portfolio economy in the South and then the North of the M25 economy where people have jobs and make things for export and vacation in the UK.
The former has been booming for years and is suddenly infuriated. The latter has been in recession and ignored for years and will likely be seeing the majority of the upside from Brexit.
There are no local sources for Macbook Pros that you can shift your consumption towards but there are local sources of groceries, and a more competitive export sector will mean more jobs and higher paid jobs.
Even more annoying, whilst I grew up working class, I'd now consider myself middle class and in a decent earning position, and yet I still cannot afford to move back to Dorset where I grew up.
http://www.ons.gov.uk/economy/inflationandpriceindices/datas...
Here are a few good examples of prices before and after the referendum as far as computer hardware goes:
[0]Intel 6700K: -April 2016: 290 GBP -August 2016: 305 -Oct 2016: 329 GBP (which is more than price in Dec of 2015 when the CPU was new, before the price drop and above MSRP due to demand)
[1]WD Black WD5001FZWX 5TB: -Jan 2016: 195 -Oct 2016: 230
[2]WD Blue WD40EZRZ 4TB: -Jan 2016: 110 -Oct 2016: 130
[3]Dell 2715U: -March 2016: 379 -Oct 2016: 388
And we can go on an on, yes these are just a few examples form a single retailer, but prices have went up, and on those that haven't simply staggered even tho there were MSRP price reductions in the US or elsewhere. You are more than welcomed to chose other local retailers and see a similar thing happening.
Also while the CPI does track electronics sales it's not a good indicator, it doesn't track the prices of everything and more people are going to buy TVs or fridges which could've been in stock or on paid order for 18 months than GPU's and new laptops.
Overall if you want to see the price hikes look at things that are moderately to fairly expensive and are sold at low (compared to other goods) consumer volume, and are usually not protected by tons of regulation, huge dealerships and backlogged inventory.
[0] https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-s... [0] https://web.archive.org/web/20160806041018/https://www.scan.... [0] https://web.archive.org/web/20160408110152/https://www.scan....
[1] https://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desk... [1] https://web.archive.org/web/20160115001838/http://www.scan.c...
[2] https://www.scan.co.uk/products/4tb-western-digital-wd40ezrz... [2] https://web.archive.org/web/20160113024836/http://www.scan.c...
[3] https://web.archive.org/web/20151229234616/http://www.scan.c... [3] https://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-p...
It's a great time to buy in the UK, sure the prices may creep up to compensate over time, not sure Apple is doing this because of currency exchange rates.
It's in inconvenient fact, but this seems to have become a political issue, where everyone wants to prove that their opinion about Brexit is correct. Therefore factual accuracy seem to have been thrown out the window.
Now that may or may not be entirely due to Brexit, but price inflation is a real thing nonetheless right now in the UK, and signs are it's about to get a whole lot bigger.
I'm unsure why people are unable to grasp this simple fact.
You political opinion is that the UK has an inflation shock coming, but it has no basis in facts in terms of Macbook Pro pricing.
A base spec 13" MacBook Pro (Retina) was $1299 in the US on Wednesday. It's now $1299.
It's baffling how people are unable to grasp this.
It rose by $0 in the US.
UK has a negative trade balance of 5bn GBP
http://www.tradingeconomics.com/united-kingdom/balance-of-tr...