Apple and the iEconomy

If you have been following the iPhone 5 news closely you will have seen talk about the success of the product being vital for the US economy. in fact J.P Morgan released the following research note which looked at the impact of iPhone sales on US GDP. Here are some extracts from the note.

"We believe the release of iPhone 5 could potentially add between 1/4 to 1/2%-point to fourth quarter annualized GDP growth. Our equity analysts believe around 8 million iPhone 5's will be sold in the US in Q4, even while sales of previous generation iPhones are maintained at a solid pace.


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%.


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. 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."


Very interesting analysis, especially where retail growth is coming from.
There has however been a lot of backlash from critics who make some valid points. Paul Krugman says that this analysis is wrong because it underestimates the second hand sales of iPhone 4's to fund the purchases of the new phones. He also says that because Apple hoard so much cash, once these sales are made, a big portion of this money will not be put back into the economy but rather sit in cash or US treasuries.


Personally I do not think that 1 company, even though it is the biggest in the world can have a significant influence on GDP. What I do believe however is that the productivity that the new iPhone, as well as any other smartphones who have to raise their game to compete, brings to it users. I as an avid iPhone fan and user I feel it is helped my productivity exceptionally. I use it all the time to access information regarding the markets. If I am travelling around i use the GPS to get me there quickly, without getting lost. Siri has improved, we don't experience it here in SA but people use it a lot more in the States. It makes us more efficient and productive. That effect is immeasurable but I reckon we all underestimate it.