Wireless Industry Led By iPhone Sales Poised to Boost Flailing Economy

Last week’s big news for the wireless industry and for the economy at large was the prediction by J.P. Morgan Chase & Co.’s Chief U.S. Economist, Michael Feroli, that Apple would sell about 8 million new iPhone 5s in the last 3 months of this year, resulting potentially in a $3.2 billion boost to GDP in the fourth quarter. If Feroli’s predictions come true, sales of the iPhone 5 could be responsible for a 0.33 percentage point jump in the annualized rate of GDP growth in the last quarter of this year. This would be welcome news given that most economists have lowered their forecasts for economic growth for the 2nd half of this year. If iPhone 5 sales really do boost economic output, this purely market driven event will result in something that the government, despite its many attempts, has thus far failed to do.

While the analyst who made this prediction warns that the estimate should be treated skeptically, he cites the impact from last year’s iPhone 4 sales as a pre-curser to the impact of sales of the iPhone 5. Feroli estimates that most of the boost in retail sales at the end of last year was due to the release of the iPhone 4. Last year’s iPhone sales boosted core retail sales in a way that boosted overall GDP growth by a fifth of a percentage point. Feroli predicts that the launch of the iPhone 5 will be even bigger than last year’s launch. If pre-sales are any indication of how big the iPhone 5 launch will be, Feroli’s predictions may well come true. As of September 17th, the Wall Street Journal reported that Apple sold out of its initial inventory of iPhone 5s just one hour after it began accepting preorders. Customers placed more than 2 million preorders for the iPhone 5 on the first day it was available. The iPhone 4 by comparison sold only 1 million preorders on its first day of availability. This means that 1/4th of the predicted sales for this quarter occurred before the first phones ever hit store shelves. In a press release, Apple reported that customer response to the iPhone has been “phenomenal”.

For their part, carriers hope that the new iPhone 5, running on faster fourth-generation networks will change customer behavior. The hope is that the new faster, more seamless downloading experience of 4G smartphones will result in higher data use per user per month and higher revenues for the carriers. The big push to build-out 4G networks leading up to the release of the iPhone 5 and other 4G devices, has been supported by huge investments on the part of carriers in network upgrades during the last couple of years. The release of the iPhone 5 and other 4G smartphones and devices also means an economic boom to those in network development. As users begin to access data faster and more seamlessly, demand for even faster download speeds and more data capacity will likely result in a future full of continuous network upgrades and additional wireless sites.

Like most, who work in the industry, I am not surprised at Feroli’s predictions about the impact of iPhone 5 sales on the overall economy. The wireless industry, one of the few industries that has been growing in the last few years, has already had a tremendous economic impact on jobs, GDP and productivity.  As reported in the CTIA Blog by Jot Carpenter in May, the wireless industry directly or indirectly supports 3.8 million jobs, or 2.6% of all U.S. employment. It contributes $195.5 billion to the U.S. GDP and it enabled an entirely new business, the “app” economy, to grow from zero to $10 billion in four years. Given the industry’s track record in the last few years, the fact that iPhone 5 sales are predicted to drive economic growth in what would have otherwise been a slow growth quarter, is no surprise.

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