iPhone 5 Release Could Boost U.S. GDP by up to 0.5 Percent

The release of the highly anticipated Apple’s smartphone could add up to 0.5pc to US GDP, a top analyst at JPMorgan predicts.

Apple iPhone 5which is expected to be announced this week, could not only boost the company’s bottom line – but could give a significant boost to the overall US economy. Photo: Martin Hajek

Sales of the new Apple’s smartphone could add between a quarter and a half percentage point to fourth quarter annualized growth in the US, predicted JP Morgan’s top economist, Michael Feroli Monday.

The analyst believes that the Californian tech giant would sell 8m iPhone 5s before the end of the year at around $600 each.

As The Telegraph writes, if there are about $200 of imported parts in the phone then $400 of each unit would count towards the US government’s GDP figure.

It was estimated that this would create a $3.2bn (£2bn) boost for the US economy, and an increase of 0.33 percentage points in annualized growth. But Mr Feroli predicts the upside could be even higher.

“Calculated using the so-called retail control method, sales of iPhone 5 could boost annualized GDP growth by $3.2 billion, or $12.8 billion at an annual rate,” Feroli explained to clients in a note entitled “Can one little phone impact GDP?”.

He went on, adding that 0.33 percentage-point boost “would limit the downside risk to our Q4 GDP growth protection, which remains 2.0 percent.”

“If hedonically-adjusted constant quality prices of phones declined due to newer or better features – a reasonable conjecture – then the lift would be even greater, though past iPhone releases don’t bear a visible impact on the relevant CPI components,” Feroli added.

The top JP Morgan’s economist mentioned that the estimate of between a quarter to a half point of annualized GDP growth was indeed eye-popping “and for that reason should be treated skeptically.” However, he added, “we think the recent evidence is consistent with this projection.”

To argue his estimates, Feroli looked back at Q4 2011 when the iPhone 4S first when on sale, reports Mac Observer.

“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 said that the smartphone’s sales 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.”

Deutsche Bank joined to Mr Feroli in their predictions: “We expect the iPhone 5 to be the most significant iPhone upgrade to date as both the radio (LTE) and form factor are being upgraded simultaneously,” the firm said.

The note continued. “We expect this feature set to drive a massive refresh cycle which should be reflected in Apple’s valuation over time.”

The Cupertino-based company is expected to unveil the iPhone 5 at a conference on Wednesday, alongside tweaked versions of the iPod Shuffle, iPod Nano and iPod Touch.

The event will take place at San Francisco’s Yerba Buena Center for the Arts, the place where Apple Inc. has unveiled its various previous products such as the iPad. Apple’s iPhone launches are among the most-watched events on the tech industry calendar.

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