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As Apple Goes, So Goes The U.S. Economy?

Apple in general—and the iPhone in particular—is having an outsized impact on the U.S. and global economies, according to a provocative piece in The New York Times.

The argument goes like this: Apple is the world’s largest company, when measured by market capitalization and it accounts for about 3.5 percent of the weighting of the Standard & Poor’s 500-stock index. Apple accounted for 18 percent of the entire rise of the S.&P. 500 index this year. That is how it drives—or at least strongly influences—the U.S. economy directly. Because the iPhone is made mainly overseas and sold worldwide, it is stimulating the economy in other regions, particular in East Asia and it keeps a substantial amount of its cash abroad. And given that the iPhone is such a major product for Apple, iPhone controls Apple and Apple controls the world.

The Times story quotes Sanford C. Bernstein analyst Toni Sacconaghi saying that “the gross profit margin for the iPhone is close to 50 percent. Because the iPhone is Apple’s most popular product — with more than 39 million sold in the last quarter— it accounts for a disproportionately large percentage of Apple’s overall profit, somewhere between 60 and 70 percent, Mr. Sacconaghi said.”

One then can factor in Apple’s influence on the electronics sector and how that impacts many other sectors. Michael Feroli, the chief United States economist for JPMorgan Chase, discusses that, for example, last saw electronic and consumer appliance store sales jump 3.4 percent while clothing sales fell 1.2 percent, according to the U.S. Commerce Department. “People are buying iPhones, partly as a status symbol,” Feroli said. “They’re not buying as much clothing.”

The influence goes even beyond that, the Times piece argued. “Even people who don’t buy iPhones and don’t own Apple shares have a stake in the company. I don’t own any Apple stock, for example, but I do have a stake indirectly through my 401(k) account. That’s because mutual funds in my portfolio own Apple shares as their biggest holdings. Nearly every pension fund holds some stock, and these days, there’s a good chance the biggest holding is Apple. And the most important financial lever at Apple is the iPhone.”

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