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Thursday, September 16, 2021
Apple’s hardware doesn’t cost more, but “you can’t eat an iPad”
Amid much fanfare, the latest iteration of the iPhone arrived this week, with more than a few grunts about Apple’s lack of product innovation (AAPL). But at least one aspect has given consumers reason to rejoice.
CNBC’s Jon Fortt astutely observed that the house Steve Jobs had built chose to keep prices at iPhone 12 levels, making the iPhone “inflation-proof.” Fortt speculated that a combination of short-term sacrifice, carrier subsidies, and Apple’s top-notch engineering gave consumers a rare and unexpected price cut for upgrading their phones.
The relative price of the iPhone 13 reminds us that until COVID-19 hit the world, advancements in technology played a huge role in increasing productivity and keeping inflation under control. Regardless of CEO Tim Cook’s rationale, Apple is defying a particularly troublesome problem that suffocates consumers: Prices are rising everywhere, with no predictable end in sight.
All of this brings us to a problem that is not getting the attention it deserves. Nowhere has inflation had a greater impact, but especially under the radar, than on what we eat.
Bloomberg highlighted the problem in a recent report that cited United Nations data showing food inflation soared 31% year-on-year in July. The story also reminded readers that the hunger riots triggered by the spike in prices were a major driver of the 2011 Arab Spring protests (as if the world needed more civil unrest).
In addition, the Consumer Price Index (CPI) for August revealed annual food inflation close to 4% in recent months. According to DataTrek Research, food prices in the United States have jumped 8% over the past two years, driven by daily staple proteins like meat, poultry, fish and eggs.
“Although protein inflation is volatile, the usual pattern is a sudden increase … followed by a subsequent decline,” Nicholas Colas, co-founder of DataTrek Research, wrote Wednesday. “We have had two increases in the recent past (2020, 2021), but no decrease yet.”
To complicate matters, the United States imports hundreds of billions of food items each year – far more than it ships overseas (alas, one story for another day). And in this area, prices are also on the rise: August import price data showed food prices were up 0.6% month over month and 10 % From one year to another.
At least part of this narrative is driven by soaring shipping costs, mostly attributed to high demand and issues in the global supply chain.
Estimating that the prices of global imports increase by 10% every time shipping costs double, Simon MacAdam of Capital Economics wrote on Wednesday, “given that ocean shipping costs have never increased as much as they do. ‘have done over the past year, the full extent of transmission is difficult to predict.
The long-term impact on consumers is not entirely clear, but MacAdam noted that “if shipping costs were to drop soon, importers might be comfortable waiting for costs to normalize. and not to increase prices ”.
However, “based on the forward contracts on charter rates for bulk carriers, traders have finally figured out over the past couple of months that shipping charges will not fall on this side of Christmas and will stay well. Above pre-virus levels through 2022. “The short version: Don’t expect relief in the aisles of grocery stores, or restaurants for that matter, anytime soon.
All of this brings us back to the curious case of Apple, and to a particularly relevant anecdote.
In 2011, New York Federal Reserve Chairman William Dudley tried to reassure Queens consumers about skyrocketing food prices. The central banker cited the latest iPad which cost the same as the previous version as the reason “you have to look at the prices of all things”.
As one can imagine, the analogy went wrong with Dudley’s working-class audience. One participant launched a memorable joke: “I can’t eat iPad.
A decade later, suffice it to say that the iPad – or iPhone – always are not edible. Policymakers would do well to remember this.
Through Javier E. David, editor at Yahoo finance. Follow him on @Teflongeek
What to watch today
Economy
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8:30 am ET: Retail sales advance, month to month, August (-0.7% expected, -1.1% in July)
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8:30 am ET: Retail sales excluding cars and gasoline, August (unchanged expected, -0.7% in July)
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8:30 am ET: Initial jobless claims, week ended September 11 (323,000 expected, 310,000 during the previous week)
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8:30 am ET: Continuing complaints, week ended September 4 (2.740 million expected, 2.783 million in the previous week)
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8:30 am ET: Philadelphia Fed Trade Outlook Index, September (19.0 expected, 19.4 in August)
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10:00 am ET: Business inventories, July (0.5% expected, 0.8% in June)
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4 p.m. ET: Total net ICT flows, July ($ 31.5 billion in June)
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4 p.m. ET: Long-term net ICT flows, July ($ 110.9 billion in June)
Earnings
Politics
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President Biden has a talk on economics at 1:45 p.m. ET. The White House has promised it will discuss efforts to “cut costs and ensure that the backbone of the country, the middle class, can finally take a break.”
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Safer American parliament, lawmakers are largely absent for a break, but a fence around the Capitol is being reinstalled ahead of a follow-up Jan. 6 rally called “Justice for D6”, which is slated for this weekend. The fence should be over by tonight.
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