Apple iPhone 5 Could Single-handedly Lift U.S. GDP 0.5%

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Uncle Same & iPhone 5Apple's iPhone 5 could single-handedly lift the U.S. gross domestic product (GDP) as much as 0.5 percent, according to JP Morgan analyst Michael Feroli. Based on some fairly simple calculations, Mr. Feroli said that the sale of 8 million iPhone 5 units in the December quarter would add some US$3.2 billion net to GDP, which works out to as much as 0.5 percent.

At the core of his math is an average retail price of $600 per iPhone (with or without a subsidy). According to Mr. Feroli, $200 of that price gets added up in the import column, which is subtracted from GDP. That leaves $400, however, is counted as "trade margins," which add to GDP.

"Thus, calculated using the so-called retail control method, sales of iPhone 5 could boost Q4 GDP by $3.2 billion, or $12.8 billion at an annual rate," the analyst wrote in a research note to clients.

That would work out to a boost in GDP of 0.33 percent. That impact could be greater, he argued, if, "the hedonically-adjusted constant quality prices of phones declined to newer or better features," which he characterized as a reasonable conjecture. Under that scenario, the iPhone 5's contribution to GDP could be as high as 0.5 percent.

As a test of his methodology, Mr. Feroli looked back at Q4 2011 when the iPhone 4S first when on sale.

"Essentially all iPhone sales occur either on-line or in retail stores. Over half of the 0.8% increase in core retail sales last October occurred in two categories: on-line sales and computer and software sales, which combined had their largest monthly increase on record."

He reasoned that iPhone sales essentially fall into one of those two categories, and that, "The incremental growth of Q4 sales at those stores over Q3, if due to the iPhone, would have added between 0.1% to 0.2%-point to Q4 growth, after subtracting the import drag."


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All of which is to say that Apple's growth means that the company has become an increasingly large part of the economy, but whoda thunk that the company would have such a major impact on GDP? Mr. Feroli's observations don't change anything, but it does put Apple's iPhone business in a different perspective.

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Will O'Neal

GDP doesn’t include imports. The iPhone is an imported product. I hope I don’t have any investments with the company who employs that analyst.

Bryan Chaffin

Will, the import aspect is mentioned in the article. The cost of materials and manufacturing is counted as an import, and the balance is counted towards GDP.


And the analyst is too simple minded to really get the effect, anyways. Maybe the iPhone would show up as .5% of GDP, but it wouldn’t be raising it by .5%

Unless, of course, all the new purchases would not be taking away from any other domestic spending.

An economist, he is not.

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