Brexit Blowback Begins: UK Home Electronics Prices Spike As Currency Crashes
The Brexit blowback on British consumers tightened today as Apple and Electrolux responded to the collapsing pound by charging dramatically more for their products in the UK. As Bloomberg reports, Apple quietly raised the cost of some of its machines including the “Mac Pro” by 20% overnight, while Sweden’s Electrolux said it’s boosting the prices of its home appliances by 10%.
With inflation already accelerating at the fastest in two years, Bloomberg notes that price pressures are likely to mount as the weakest pound in three decades forces up the cost of imports just weeks before Christmas.
The price hikes came days after “Marmitegate” saw supermarket Tesco Plc battle with supplier Unilever over the cost of goods and Microsoft Corp. began charging Britons more for some of its software.
“We will see more price increases, possibly more at the higher end of the market, and we’ll see a significant squeeze on real incomes and then we’ll see how it plays out,” said Kit Juckes, a London-based strategist at Societe Generale SA.
Apple began charging 2,999 pounds ($3,650) for its “Mac Pro” desktop machine, up from 2,499 pounds earlier in the week. The “Mac Mini” now retails at 479 pounds compared to 399 pounds. The U.S. prices for the Mac Mini and Mac Pro haven’t been changed.
“Apple suggests product prices internationally on the basis of several factors, including currency exchange rates, local import laws, business practices, taxes, and the cost of doing business,” an Apple spokesman said in a statement. “These factors vary from region to region and over time, such that international prices are not always comparable to U.S. suggested retail prices.”
Electrolux CEO Jonas Samuelson says main effect of Brexit is that GBP has devalued sharply against EUR, adding that “we need to compensate by raising prices,” in the U.K. Samuelson raised prices in U.K. by up to 10% and notes “we’ve seen clear cautiousness from retail and construction, which has put slight pressure on demand, but we haven’t seen any larger effects on consumer demand”
One government official this week told British consumers to brace for higher prices.
“We have had Marmageddon,” Mark Garnier, the U.K.’s trade minister, said in an interview.
“Consumers are going to start to see rising prices and there’s nothing we can do about that. That was a well-predicted effect of Brexit. The point was very clearly made by everybody: Brexit could easily result in a slump in the value of sterling. That has transpired.”
With the pound continuing to collapse this morning following the Brexit suit outcome, and Goldman’s estimates of considerably more pain to come, inflationary pressures may just be too much for Carney to overlook as transitory this time.
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