Just a week ago, £2,499 ($3,039) was enough to buy a Brit a brand new Apple Mac Pro desktop machine. But overnight Thursday, Apple quietly raised the price to £2,999 for its British customers, marking a whopping 20% increase for a product that hasn’t been updated in years.
The price rise comes as a response to the almost 20% slide in the pound against the dollar since the U.K.’s Brexit vote in June, which has eaten into Apple’s British profits.
And the tech giant isn’t alone in addressing the sterling plunge. Other international companies are also hiking prices in the U.K. and the moves are starting to squeeze British households and crush their optimism about the future.
Three separate reports out on Friday all pointed to a fall in consumer confidence this fall, predicting lower spending as the government prepares to kick off formal exit negotiations with the European Union.
The YouGov/Cebr Consumer Confidence Index in October fell to 109.3, its lowest reading since July — in the immediate aftermath of the EU referendum — and the second weakest level since September 2013.
“Overall confidence has fallen because of a decline in people’s household financial situations,” Stephen Harmston, head of YouGov reports, said in the release.
“Consumers have already noticed increasing prices after the government signaled it would seek a ‘hard’ Brexit and the exchange rate slumped as a consequence. People’s household financial situations over the past 30 days has suffered its greatest month-on-month fall since December 2014,” he added.
The pound has plunged against other major currencies after the Brexit vote and analysts suggest the slump isn’t over yet. Talks of a so-called hard Brexit — a deal in which the U.K. gives up access to the EU single market in return for complete immigration control — have seen the pound’s drop accelerate over the past month.
Against the dollar, sterling is down 18% at $1.2185 since the vote, while it has erased 15% against the euro.
“Declining optimism about economic prospects for the wider U.K. economy has depressed the consumer mood this month,” said Joe Staton, head of market dynamics at market research institute GfK.
GfK’s Consumer Confidence Index for the U.K. fell to by 2 points to negative 3 in October, while confidence in the economy over the next 12 months slid 8 points to negative 17.
“Sterling’s sharp decline is arguably stoking fears that price rises will hit U.K. living standards hard next year,” he added.
The pound fall can be great news for big multinational companies that make most of their money overseas, but it’s bad news for local consumers as it makes imported products, such as food, clothes, fuel and electronics more expensive.
Food and fuel: The price hike for Apple’s Mac Pro is only one instance. Consumer-goods giant Unilever, for example, earlier in October asked U.K. supermarkets for price hikes on popular its products, which include household names such as Hellmann’s mayonnaise, Dove soap, Ben & Jerry’s ice cream and Marmite — a popular brown, salty spread with a cult-like following. The company cited rising costs in dollars coupled with the sharp pound drop as reasons for the price increases.
Gas — which is priced in dollars — has also become more expensive for U.K. consumers even as oil prices have been consistently low. The higher import costs on such key items have pushed up inflation, which in September rose to 1%, the highest level since November 2014. The Bank of England expects inflation to rise to 2% in the first half of 2017.
“If inflation continues to rise at the same rate as predicted, it could eclipse wage growth and leave consumers with less income in their pockets by the middle of 2017,” said Asda, in its release of its monthly Income Tracker on Friday.
The supermarkets chain, which is owned by Wal-Mart Stores Inc, said it has already seen the first signs of a post-vote slowdown, with household-spending growth year-over-year dropping to £9 a week in September. That’s the first time since October 2014 spending growth has fallen into the single digits, Asda said.
“[This] will cause some concerns for consumers, so we will be watching the trends carefully over the coming months,” the company said.
The trio of consumer reports come a day after the release of U.K.’s gross domestic product report for the third quarter. At 0.5% growth, the data breezed past expectations, but economists said the solid expansion is unlikely to continue as the country gets closer to leaving the European Union.
Source: Market Watch