New iPhone will boost US GDP – JP Morgan

The US economy is about to get a lift is on the way, JP Morgan says.

But has nothing to do with the Federal Reserve or Congress.

Rather, the investment banks says Apple's latest iPhone – which the rumour mill says will be the subject of an Wednesday (5am Thurs NZT) event – will sell eight million during the fourth quarter.

That would equate to a $US12.8 billion boost to US economy, at an annual rate, and a 0.33% GDP lift for the fourth quarter.

To put that in context, economists have been picking a 2% GDP increase for the quarter. 

If the iPhone 5 boost eventuates, it could be the difference between economic forecasts meeting target, or not – and all the market-moving buzz that attends a hit or miss.

Apple shares [NAS:AAPL] closed down .032% today to $US660, valuing the company at $US619 billion, making it still the world's most valuable company some margin.

A Treasury spokesman told NBR ONLINE the NZ government agency does not model the financial impact of any new product.

RAW DATA: Excert from JP Morgan note to clients

Our equity analysts believe around 8 million iPhone 5s will be sold in the US in Q4, even while sales of previous generation iPhones are maintained at a solid pace.

While we have no idea how much these will retail for, if it is similar to previous launches it would be around $US600.

Likewise, if the imported cost component is similar to previous leading generation phones it would imply around a $US200 per phone addition to imports (which is a subtraction from GDP). The difference between these two figures, $US400, would represent the trade margins, which figure into GDP.

Thus, calculated using the so-called retail control method, sales of iPhone 5 could boost Q4 GDP by $US3.2 billion, or $US12.8 billion at an annual rate. This would boost annualised GDP growth in Q4 by 0.33 per cent-point.

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. The third of a percentage point lift would limit the downside risk to our Q4 GDP growth projection, which remains 2.0 per cent.

This estimate seems fairly large, and for that reason should be treated sceptically. However, we think the recent evidence is consistent with this projection. The last iPhone launch was at a similar time last year. In October of last year, when the iPhone 4S first became widely available, overall retail sales that month significantly outperformed expectations.

Essentially all iPhone sales occur either on-line or in retail stores.

Over half of the 0.8 per cent 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. The incremental growth of Q4 sales at those stores over Q3, if due to the iPhone, would have added between 0.1 per cent to 0.2 per cent-point to Q4 growth, after subtracting the import drag. Given the iPhone 5 launch is expected to be much larger, we think the estimate mentioned in the first paragraph is reasonable.