New iPhones: Wall Street Is Focused on the Price
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What big economic headlines set the scene before the iPhone discussion?
With your Money Briefing, I'm J.R. Whalen at The Wall Street Journal in New York. When Apple announces three new iPhone models this week, Wall Street will be far more interested in the price than how big the screen is. We'll explain why in a moment. First, these money and market stories you should know. The Federal Reserve says the consumer borrowing rose $16.6 billion in July to a seasonally adjusted $3.91 trillion.
How did recent consumer borrowing and spending data change in July and Q2?
That's an annual growth rate of 5.1 percent and well ahead of what economists were expecting. Non-revolving credit, which includes debt such as auto and student loans, jumped 6.4 percent in July. That followed a 4 percent gain in June and the largest increase in eight months. In the April to June quarter, consumer spending jumped 3.8%, due in part to the tax cuts. Economists in Wall Street will be focused on whether consumer spending will remain strong in upcoming quarters. Wage gains are typically considered a precursor to inflation. And while last week's employment report detailed larger-than-expected gains in average hourly wages and raised new concerns about an acceleration in inflation, Wall Street is not betting on a large acceleration in price increases.
Continued tension between the U.S. and its major trading partners has dampened economic activity and threatens to further restrain the pace of growth. And a study by Bankrate focuses on which college majors are likely to result in landing a job. Turns out students who major in the fine arts face a 9% unemployment rate in their field and average incomes that are below $41,000 a year. That's the second lowest average annual salary of any of the 162 majors analyzed and the highest unemployment rate for a major.
What college majors and employment trends did the Bankrate study highlight?
The current jobless rate nationwide is under 4%. Students who majored in cosmetology, culinary arts, and clinical psychology also faced a tough go of it, looking for work after graduation. Meanwhile, students majoring in actuarial science, zoology, and nuclear engineering faced unemployment rates within their major of under 2.5%, and average incomes above $108,000 per year.
Apple is expected to unveil three new iPhone models at an event on Wednesday. And while the iPhone's features will be important to iPhone fans, investors will be keeping an eye on the price. Wall Street Journal Heard on the Street columnist Dan Gallagher is here with us to explain. So Dan, as you write in your column in the Wall Street Journal, it's the average selling price of iPhones that Wall Street is focused on.
It is, and it makes it kind of an interesting event because consumers, of course, want the lowest price you can get. But if Apple priced it too low, they'd probably get a bad reaction from investors because we're in a period where iPhone sales, unit sales aren't really changing much because overall smartphone sales aren't really growing either. The way Apple is getting growth is they are putting more –
Why is Wall Street more focused on iPhone price than screen size for the new models?
higher-priced devices into the mix, and therefore raising the revenues they're getting from the iPhone business. So in this last season, they did that with the iPhone X, the way some people see it. That's an expensive phone that kind of raised that price. They need to keep that price up, and this is next cycle.
And it's really important to see how they follow up with the iPhone X as far as what the phone is and what the price will be, because the iPhone X... was a thousand dollars. I mean, that was a huge headlining phone when it came out from a price standpoint and a feature standpoint.
Yeah. And I think, you know, if the plans that we're seeing, you know, based on, you know, our reporting and some other news outlets, it looks like there'll be more devices that are at that price level or above. You know, one of them, they're going to put out essentially a larger version of the iPhone, you know, X, you know, with an OLED screen and even bigger size. And I don't know what price that's going to be, but certainly going to be more than a thousand. So, You know, they have to keep these premium ones, you know, up there and hopefully get some demand on them.
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Chapters
6 chapters
1
What big economic headlines set the scene before the iPhone discussion?
0:05–0:30
2
How did recent consumer borrowing and spending data change in July and Q2?
0:30–1:46
3
What college majors and employment trends did the Bankrate study highlight?
1:46–3:04
4
Why is Wall Street more focused on iPhone price than screen size for the new models?
3:04–4:24
5
How does Apple use higher-priced iPhone models to drive revenue and satisfy investors?
4:24–5:24
6
What role does customer loyalty and services revenue play in Apple's growth strategy?
5:24–6:23
Speakers
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