iPhone 5 not just a phone; it’s a stimulus too

September 15, 2012
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Apple is expected to sell as many as 10 million of the devices in just the first days of the launch/AFP-File
WASHINGTON, Sept 15 – Apple’s iPhone 5 is one of the biggest product launches ever in the sector, and may also deliver a well-timed stimulus to the US economy ahead of the presidential election, analysts say.

Apple is expected to sell as many as 10 million of the devices in just the first days of the launch starting September 21, and upwards of 50 million in the fourth quarter, including a big chunk in the United States.

JP Morgan economist Michael Feroli said he sees the iPhone 5 adding between 0.25 and 0.5 percentage points to US economic activity in the fourth quarter, based on projected US sales of eight million.

Feroli said it was a simple math calculation: if the phones are worth $600, including carrier subsidies, minus $200 for import costs, that would be $3.2 billion in net sales, or $12.8 billion at an annual rate, boosting gross domestic product (GDP) by 0.33 points.

Cary Leahey, chief US economist at Decision Economics, said the calculation “makes sense.”

“It just shows the power of an extremely popular product which is priced very dear,” Leahey said.

He said the boost was “noticeable but not earth-shattering.”

But with the US economy having expanded at a tepid 1.7 percent pace in the second quarter, the stimulus will be well-timed.

“The economy absolutely needs it, it could not come at a better time,” said Joel Naroff at Naroff Economic Advisors.

“The economy absolutely needs it, it could not come at a better time” – Joel Naroff, Naroff Economic Advisors.

“Household incomes are flat, real disposable income is going nowhere. You don’t have any source of fuel, so it’s got to come from somewhere.”

Naroff said that US consumers will likely pull money out of savings for the iPhone and similar devices, and in some cases, it may be simply a matter of pulling the spending forward.

“The net impact on the economy is not clear,” he said.

Paul Krugman, a Princeton University economist who blogs for The New York Times, said the stimulus effect underlines how the US economy is dependent on consumer spending.

“To believe that more spending will provide an economic boost, you have to believe – as you should – that demand, not supply, is what’s holding the economy back,” Krugman wrote.

“We don’t have high unemployment because Americans don’t want to work, and we don’t have high unemployment because workers lack the right skills.

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