As millions of people across the country line up to purchase the shiny new iPhone 5, economists estimate that Apple’s newest device could boost more than the speed of mobile Internet — it could add as much as half a percentage point to fourth-quarter gross domestic product.
Based on predictions that Apple would sell 8 million iPhone 5s over opening weekend, JP Morgan’s Michael Feroli calculates an estimated $3.2 billion boost to fourth-quarter GDP, which would raise the annualized fourth-quarter growth rate by a third of a percentage point. Feroli’s calculations were straightforward: If each unit sells for about $600 and contains about $200 in imported parts, then each individual iPhone 5 sale adds about $400 to GDP.
Depending on the quality of the phone, Feroli estimated the boost to GDP would be between 0.25 and 0.5 percentage points — a significant bump with fourth-quarter GDP currently estimated at somewhere between 2 and 1.5 percent.
Feroli’s calculation might seem like a lot, but JP Morgan’s Dan Silver said analysts saw a similar lift for the iPhone 4s last year, and the estimates for sales are higher for the newest phone.
Apple’s iPhone 5 initial sales fell short of predictions, with just 5 million units sold as of last Monday. Still, sales surpassed records set last year with the release of the iPhone 4s. A Sept. 25 report from Nomura Group based on the number of iPhones sold over the weekend estimated that sales would contribute 0.13 points to third-quarter growth and two-tenths of a point in the fourth.
And that was just one weekend. Analysts estimate September-quarter iPhone unit sales at around 25 million, a modest boost from previous forecasts, and December-quarter sales at up to 50 million. On the lower end of estimates, UBS analyst Steve Milunovich last week slashed his sales forecast for the quarter ending Dec. 31 from 44 million to 38 million, according to Forbes. Milunovich cited continued signs of tight supplies for the device, which may have contributed to initial sales falling short of predictions.
Some analysts say, if anything, Feroli’s calculation understates the economic boost due to the release of the iPhone 5. The Brookings Institution’s Darrell West pointed out that the iPhone provides a platform on which other developers can innovate: apps.
“There are a large number of people developing apps for the iPhone that are producing great advances in education and health care communications and commerce,” West said, adding that Feroli’s calculations were based solely on the direct value of the iPhone, as opposed to the “multiplier effect” of the device.
But other experts counter that Feroli’s estimate is overstated, saying that consumers have cut back on other spending in order to pay for the iPhone. Scott Hoyt, senior director of consumer economics for Moody’s, said that some Apple retail outlets had weak sales in August, indicating that consumers were saving money on other phone-related purchases in order to buy the iPhone 5.
Hoyt added that Moody’s is not changing its fourth-quarter forecast because other factors, such as the Midwest drought, will subtract from GDP, offsetting the iPhone’s impact.
On the other hand, if the performance last year of the iPhone 4s is any indication, Hoyt allowed that iPhone 5 sales could boost GDP.
“Obviously, it wasn’t as big so there wasn’t as much of a follow-through to GDP, and with everything else going on [in the economy] it was hard to point to an impact on GDP,” Hoyt said of the 4s. “But there definitely is a precedent for it, and this clearly is much bigger than what happened last year.”
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