The latest iPhones are selling quickly, which benefits not only Apple but the economy and stock market as well. Because of popularity and high price, iPhones have a large impact. Michael Feroli, chief United States economist for JP Morgan Chase estimates that iPhone sales "are adding one-quater to one-third of a percentage point to the annualized growth rate of the gross domestic product." The author of this article considers the iPhone to be a significant financial force.
Obviously, iPhone sales benefit Apple. The company experiences a strong increase in profits every two years when they release a new model. The average price of an iPhone is $603. This is much higher than advertised price but "the full price is embedded in service agreements" with phone carriers. This is lucrative for Apple, since the cost of producing an iPhone has stayed around $200 for a while. An analyst at Sanford C. Bernstein says "the gross profit margin for the iPhone is close to 50%…[and] it accounts for a disproportionately large percentage of Apple's overall profit, somewhere between 60 and 70 percent."
The iPhone also has significant impact in the stock market. Apple is the biggest company in the world by market capitalization. Through Thursday "because its stock has performed magnificently while the overall market has not, Apple accounted for 18 percent of the entire rise of the S. &P. 500 index this year."Apple impacts even those who don't directly own its stock. "Nearly every pension fund holds some stock, and these days, there's a good chance the biggest holding is Apple."
The iPhone benefits foreign economies, because it is made mainly overseas and sold throughout the world. This makes it difficult to directly determine Apple's impact on the US economy but the impact is definitely present. The article points out that electronic and consumer appliance store sales jumped 3.4 percent last month. With all of these combined factors and the approach of the holidays, economies should be enjoying the benefits of increase iPhone sales for the next couple of months.
I hadn't considered the massive effects of the iPhone on the economy. What products had this kind of effect prior to the iPhone? And how long can the iPhone maintain such a significant impact?
Source: http://www.nytimes.com/2014/10/26/your-money/when-iphones-ring-the-economy-listens.html?ref=business
It is interesting to think about how long the iPhone can maintain such a significant impact. If it is true that most pension plans hold apple stock and it has such a large impact on the S & P 500, then a large decrease in apple's stock could very negatively affect the economy. When does apple become too big to fail?
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