6 ms·

When your currency goes down, expect import prices to rise. It's really that simple

by seibelj 10y ago

keithpeter 10y ago
And our economy grows slightly as we shift more stuff outside UK because the pricing becomes more attractive. Second order effect of course.
- dmichulke 10y ago
  Unless you have a negative trade balance. In that case your import prices rise more in absolute terms than your export prices. UK has a negative trade balance of 5bn GBP http://www.tradingeconomics.com/united-kingdom/balance-of-trade http://www.tradingeconomics.com/united-kingdom/balance-of-tr...
- danieldk 10y ago
  Until/unless the UK is removed from the single EU market.
blowski 10y ago
When prices for imported electronic goods go up by 20% across the board, I'll agree that this is due purely to the currency shift. I don't see that happening.
- bartread 10y ago
  That may depend when suppliers' contracts on currency hedges come to an end. 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.
  - blowski 10y ago
    If the currency falls by 20%, while the prices of imported goods will rise, it's unlikely that they will rise by 20%. A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. 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.
    - danieldk 10y ago
      A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. 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.
      - blowski 10y ago
        True, but even then, they have to pay UK taxes, someone in the UK to ship it to your door, a UK-based accounting firm for filing accounts, etc. Plus, they have UK warehouses for their UK shops, and those costs are spread across online and offline sales.
    - lorenzhs 10y ago
      > A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. It really isn't: http://fitsmallbusiness.com/order-fulfillment-costs/ 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.
      - blowski 10y ago
        The laptop used to be £1600, so removing the sales tax, Apple UK received £1300. So Apple UK has UK costs, let's say they are 15% of the laptop so around £200 per laptop, and Apple US receives the remaining £1100. 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%.
- dogma1138 10y ago
  Prices have went up about by 15-20% across the board just not overnight. Look at the PC hardware prices over the past ~2 years since the GBP started falling pretty steeply after the post financial crisis plateau. Large companies like MSFT and Apple just bite the bullet and not change prices every time there is a shift in the currency but they usually do large adjustment every 1-2 years if things don't bounce back or it's unlikely that they would.
  - blowski 10y ago
    According to the ONS, prices on most electronic goods have actually fallen over the last couple of years. Apple also put UK prices up a bit last year. With inflation running <1%, it's hard to see why it would suddenly rise this year by 20%. http://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation http://www.ons.gov.uk/economy/inflationandpriceindices/datas...
    - dogma1138 10y ago
      The CPI for this year on electronic appliances has an increase of 1-2% month to month for the past 12 months, with a similar trend in 2015. And this is on goods which tend to be more resilient, travel, various insurance and thing that rely on currency exchange at the point of transaction have increased by 11-20% (depending on the destination due to EUR/USD adjustments) especially things like air travel. If you are buying PC parts from local stores in the UK you can see the change in prices over the past 2 years, and yes these are at nearly 20%, other things like Laptops have also went up by 10% or more, Dell, HP, and the rest have increased their prices earlier this year http://www.techradar.com/news/computing/pc/hp-follows-dell-with-pc-price-hike-thanks-to-brexit-1324754 http://www.techradar.com/news/computing/pc/hp-follows-dell-w.... 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-skylake-quad-core-40ghz-42ghz-turbo-8mb-cache-1150mhz-gpu-40x-ratio-91w-c https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-s... [0] https://web.archive.org/web/20160806041018/https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-skylake-quad-core-40ghz-42ghz-turbo-8mb-cache-1150mhz-gpu-40x-ratio-91w-c https://web.archive.org/web/20160806041018/https://www.scan.... [0] https://web.archive.org/web/20160408110152/https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-skylake-quad-core-40ghz-42ghz-turbo-8mb-cache-1150mhz-gpu-40x-ratio-91w-c https://web.archive.org/web/20160408110152/https://www.scan.... [1] https://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desktop-performance-35-hdd-sata-iii-6gb-s-7200rpm-128mb-cache https://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desk... [1] https://web.archive.org/web/20160115001838/http://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desktop-performance-35-hdd-sata-iii-6gb-s-7200rpm-128mb-cache https://web.archive.org/web/20160115001838/http://www.scan.c... [2] https://www.scan.co.uk/products/4tb-western-digital-wd40ezrz-wd-blue-35-hdd-sata-iii-6gb-s-5400-rpm-64mb-cache https://www.scan.co.uk/products/4tb-western-digital-wd40ezrz... [2] https://web.archive.org/web/20160113024836/http://www.scan.co.uk/products/4tb-western-digital-wd40ezrz-wd-blue-35-hdd-sata-iii-6gb-s-5400-rpm-64mb-cache https://web.archive.org/web/20160113024836/http://www.scan.c... [3] https://web.archive.org/web/20151229234616/http://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-panel-2560x1440-6ms-350cd-m-dp-mdp-hdmi-black https://web.archive.org/web/20151229234616/http://www.scan.c... [3] https://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-panel-2560x1440-6ms-350cd-m-dp-mdp-hdmi-black https://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-p...
neximo64 10y ago
Thing is when it goes up they take an awful long time to adjust it.
3princip 10y ago
I just bought a new Dell XPS 13, which is now cheaper in the UK than the US (I can't recall that ever being the case in the past). 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.
HalfwayToDice 10y ago
UK pricing for new Macbook Pro is cheapest in Europe. 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.
- tnjm 10y ago
  I think the point in the article is that if your income in GBP remained stable since June 23rd, Macs in the UK have become less affordable. That is, they're the cheapest in Europe in October 28th pounds sterling, but not in June 23rd pounds sterling. 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.
  - HalfwayToDice 10y ago
    But it's not due to Brexit because the prices rose in every country. 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.
    - tnjm 10y ago
      A base spec 13" MacBook Pro (Retina) was £999 in the UK on Wednesday. It's now £1249. A base spec 13" MacBook Pro (Retina) was $1299 in the US on Wednesday. It's now $1299.
      - HalfwayToDice 10y ago
        And the price rose in every other country too. It's baffling how people are unable to grasp this.
        tnjm 10y ago
        The price of the machine I'm speaking about rose by £250 in the UK. It rose by $0 in the US.

When your currency goes down, expect import prices to rise. It's really that simple

by seibelj 10y ago

When your currency goes down, expect import prices to rise. It's really that simple

And our economy grows slightly as we shift more stuff outside UK because the pricing becomes more attractive. Second order effect of course.

dmichulke 10y ago
Unless you have a negative trade balance. In that case your import prices rise more in absolute terms than your export prices. UK has a negative trade balance of 5bn GBP http://www.tradingeconomics.com/united-kingdom/balance-of-trade http://www.tradingeconomics.com/united-kingdom/balance-of-tr...
danieldk 10y ago
Until/unless the UK is removed from the single EU market.

blowski 10y ago

When prices for imported electronic goods go up by 20% across the board, I'll agree that this is due purely to the currency shift. I don't see that happening.

bartread 10y ago
That may depend when suppliers' contracts on currency hedges come to an end. 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.
- blowski 10y ago
  If the currency falls by 20%, while the prices of imported goods will rise, it's unlikely that they will rise by 20%. A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. 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.
  - danieldk 10y ago
    A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. 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.
    - blowski 10y ago
      True, but even then, they have to pay UK taxes, someone in the UK to ship it to your door, a UK-based accounting firm for filing accounts, etc. Plus, they have UK warehouses for their UK shops, and those costs are spread across online and offline sales.
  - lorenzhs 10y ago
    > A big part of the cost is local (e.g. internal shipping, running UK-based warehouses, tax), so remain unaffected. It really isn't: http://fitsmallbusiness.com/order-fulfillment-costs/ 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.
    - blowski 10y ago
      The laptop used to be £1600, so removing the sales tax, Apple UK received £1300. So Apple UK has UK costs, let's say they are 15% of the laptop so around £200 per laptop, and Apple US receives the remaining £1100. 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%.
dogma1138 10y ago
Prices have went up about by 15-20% across the board just not overnight. Look at the PC hardware prices over the past ~2 years since the GBP started falling pretty steeply after the post financial crisis plateau. Large companies like MSFT and Apple just bite the bullet and not change prices every time there is a shift in the currency but they usually do large adjustment every 1-2 years if things don't bounce back or it's unlikely that they would.
- blowski 10y ago
  According to the ONS, prices on most electronic goods have actually fallen over the last couple of years. Apple also put UK prices up a bit last year. With inflation running <1%, it's hard to see why it would suddenly rise this year by 20%. http://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation http://www.ons.gov.uk/economy/inflationandpriceindices/datas...
  - dogma1138 10y ago
    The CPI for this year on electronic appliances has an increase of 1-2% month to month for the past 12 months, with a similar trend in 2015. And this is on goods which tend to be more resilient, travel, various insurance and thing that rely on currency exchange at the point of transaction have increased by 11-20% (depending on the destination due to EUR/USD adjustments) especially things like air travel. If you are buying PC parts from local stores in the UK you can see the change in prices over the past 2 years, and yes these are at nearly 20%, other things like Laptops have also went up by 10% or more, Dell, HP, and the rest have increased their prices earlier this year http://www.techradar.com/news/computing/pc/hp-follows-dell-with-pc-price-hike-thanks-to-brexit-1324754 http://www.techradar.com/news/computing/pc/hp-follows-dell-w.... 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-skylake-quad-core-40ghz-42ghz-turbo-8mb-cache-1150mhz-gpu-40x-ratio-91w-c https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-s... [0] https://web.archive.org/web/20160806041018/https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-skylake-quad-core-40ghz-42ghz-turbo-8mb-cache-1150mhz-gpu-40x-ratio-91w-c https://web.archive.org/web/20160806041018/https://www.scan.... [0] https://web.archive.org/web/20160408110152/https://www.scan.co.uk/products/intel-core-i7-6700k-s-1151-skylake-quad-core-40ghz-42ghz-turbo-8mb-cache-1150mhz-gpu-40x-ratio-91w-c https://web.archive.org/web/20160408110152/https://www.scan.... [1] https://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desktop-performance-35-hdd-sata-iii-6gb-s-7200rpm-128mb-cache https://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desk... [1] https://web.archive.org/web/20160115001838/http://www.scan.co.uk/products/5tb-wd-black-wd5001fzwx-desktop-performance-35-hdd-sata-iii-6gb-s-7200rpm-128mb-cache https://web.archive.org/web/20160115001838/http://www.scan.c... [2] https://www.scan.co.uk/products/4tb-western-digital-wd40ezrz-wd-blue-35-hdd-sata-iii-6gb-s-5400-rpm-64mb-cache https://www.scan.co.uk/products/4tb-western-digital-wd40ezrz... [2] https://web.archive.org/web/20160113024836/http://www.scan.co.uk/products/4tb-western-digital-wd40ezrz-wd-blue-35-hdd-sata-iii-6gb-s-5400-rpm-64mb-cache https://web.archive.org/web/20160113024836/http://www.scan.c... [3] https://web.archive.org/web/20151229234616/http://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-panel-2560x1440-6ms-350cd-m-dp-mdp-hdmi-black https://web.archive.org/web/20151229234616/http://www.scan.c... [3] https://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-panel-2560x1440-6ms-350cd-m-dp-mdp-hdmi-black https://www.scan.co.uk/products/27-dell-u2715h-monitor-ips-p...

neximo64 10y ago

Thing is when it goes up they take an awful long time to adjust it.

3princip 10y ago

I just bought a new Dell XPS 13, which is now cheaper in the UK than the US (I can't recall that ever being the case in the past). 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.

HalfwayToDice 10y ago

UK pricing for new Macbook Pro is cheapest in Europe. 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.

tnjm 10y ago
I think the point in the article is that if your income in GBP remained stable since June 23rd, Macs in the UK have become less affordable. That is, they're the cheapest in Europe in October 28th pounds sterling, but not in June 23rd pounds sterling. 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.
- HalfwayToDice 10y ago
  But it's not due to Brexit because the prices rose in every country. 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.
  - tnjm 10y ago
    A base spec 13" MacBook Pro (Retina) was £999 in the UK on Wednesday. It's now £1249. A base spec 13" MacBook Pro (Retina) was $1299 in the US on Wednesday. It's now $1299.
    - HalfwayToDice 10y ago
      And the price rose in every other country too. It's baffling how people are unable to grasp this.
      - tnjm 10y ago
        The price of the machine I'm speaking about rose by £250 in the UK. It rose by $0 in the US.