By now you have probably heard how important Apple (AAPL) is for the general indexes especially the NASDAQ (~14% of the index). We saw that yesterday when Apple had one of its rare serious down moves of the year, and took the entire market – especially the NASDAQ which was down a full percent – with it. But this analysis by economist Michael Feroli of JPM is staggering – the launch of iPhone 5 could single handily increase the GDP of a $14T economy such as the U.S. by 0.25%-.50%. Wow. Further, he made some interesting comments on how we should expect upside surprises to all 'retail oriented' economic data in that time frame.
- Economist Michael Feroli of JPMorgan Chase (JPM) estimated Monday that sales of the new phone, expected to start later this month, “could potentially add” from one-quarter to one-half of a percentage point to the growth rate of U.S. gross domestic product in the final quarter of the year.
- Here’s Feroli’s math: Assume sales of previous-generation iPhones continue “at a solid pace,” while the new model from Apple (AAPL) sells about 8 million units in the last three months of 2012. Assume the average selling price for the new models is about $600. (True, people who get the new phone as part of a calling plan pay less than the sticker price, but the sale gets reported to the government for what it would have cost on a stand-alone basis.)
- Out of that $600, about $200 is the imported cost, leaving $400 as the value captured in the U.S. Multiply $400 times 8 million and you get a pop of $3.2 billion, which is enough to boost the annualized growth rate of the economy by one-third of a percentage point. Feroli, the bank’s chief U.S. economist, expects the U.S. economy to grow at an annual rate of about 2 percent in the fourth quarter, and says the iPhone will “limit the downside risk” to that projection.
- “This estimate seems fairly large, and for that reason should be treated skeptically,” writes Feroli in a research note titled “Can one little phone impact GDP?” But he says the projection fits with what happened when the iPhone 4S, a less ballyhooed product, was released last October. “Overall retail sales that month significantly outperformed expectations,” he writes, and “online sales and computer and software sales … had their largest monthly increase on record.”
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