Can iPhone 5 Boost the Economy?

Filed in Gather Business News Channel by on September 12, 2012 0 Comments

Apple’s announcement revealing the new iPhone 5 is not the only iPhone news this week. JP Morgan Chase economist Michael Feroli predicts sales could play a role in boosting the U.S. economy. According to Feroli, the Cupertino-based company’s newest smartphone will spark a national spending spree that will “boost annualized GDP growth in Q4 by 0.33%-point,” as he stated in a research note titled “Can one little phone impact GDP?”

For those who don’t speak economist, that means Apple fanboys lined up and camped out in front of stores to buy the phone will grow the U.S. economy by a third of a percentage point in October, November and December. Although one-third of a percentage point does not seem like a lot, it is a pretty lofty expectation when put into context. When you consider that the U.S. GDP grew 1.7 percent from the first quarter to the second quarter of 2012, according to the U.S. Bureau of Economic Analysis, 0.33 percent in one quarter would be a significant increase.

This prediction significantly assumes a lot. Previous generation iPhone sales would have to continue at a solid pace. Plus the iPhone 5 would have to sell 8 million units at $600 dollars a pop, a price that is significantly lowered by carrier plan contracts. Many are proclaiming the impossibilities of the prediction for which Feroli agreeably cautions, “The estimate seems fairly large and should be treated with skepticism for that reason.” It certainly seems like Feroli doesn’t believe it himself and with such backpedaling doubt, it is hard to imagine why anyone else should believe it.

Claiming such an unbelievably large number doesn’t account for people who would have spent that money anyway. To arrive at such a conclusion you would have to assume that every single dollar spent on iPhones would not be spent anywhere else during the last three months of the year. A lot of people these days keep their money safely tucked away for necessities. It is pretty presumptuous to assume people will spend the money they were going to spend on rent on an iPhone instead.

With news of this controversial economic presumption coming just a day before Apple’s official announcement, it begs the questions: Is this an underhanded way of increasing stock value or is this shameless plug by Chase just a sneaky PR tactic? If this was a below-the-line advertising and marketing effort, it is nothing short of genius. If it was not intentional, it is still a great piece of marketing and one thing is for sure: A lot of advertising gurus and experts are kicking themselves right now.

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