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JPM Cuts Q4 GDP Forecast to 1.5%, Now Sees iPhone Sales Contribute 33% Of Growth Upside

Tyler Durden's picture


Remember Michael Feroli? The JPM economist who "predicted" US Q4 GDP would be boosted by 0.5% due to iPhone sales (don't laugh: yes, US GDP, not that of China where the iPhone is actually produced, but the US where the consumer merely incurs more record student loans to be able to afford it)? Well, the same JPMorganite has now cut his Q4 GDP expectation to 1.5% for all the same reasons why we penned the second Q3 GDP revision: namely ugly internals, a surge in hollow government and inventory contributions to "growth", and a collapse in the purchasing power of the US consumer (who somehow is still expected to boost Q4 GDP with iPhone sales). And while there is no mention of the iPhone in his just released downward revision, he still believes the cell phone will provide a boost to Q4 GDP. In other words, of the 1.5% in GDP growth in Q4, the iPhone will account for 33% of this! One really can not make this up.

From JPM:

  • Real GDP growth for 3Q12 is revised up to 2.7%, but forecast for 4Q12 is lowered to 1.5%
  • Downward revision is prompted by a large inventory build in 3Q12, weak consumer spending through Oct
  • It is hard to know how much Hurricane Sandy affected Oct-Nov data including upcoming labor, ISM reports

The forecast for real GDP growth in the current quarter has been revised down to 1.5% saar (from 2.0%). Part of the downward revision reflects this week’s second report on 3Q12 GDP. Although real growth for last quarter was revised up to 2.7% saar (from 2.0%), the composition of growth now shows appreciably more inventory accumulation and weaker real domestic final sales, both negatives for current-quarter growth. In addition, real consumer spending declined 0.3% samr in October, weaker than expected on the basis of October retail sales and expected hurricane effects. Even assuming a healthy rebound in spending in November and December, real consumer spending growth this quarter appears to be tracking 1.5%, below the prior forecast of 2.0%.


Not all incoming data are weak. New orders for core capital goods surprised by rebounding 1.7% samr in October despite a strong tendency for such orders to be unusually weak in the first month of a quarter, even on a seasonally adjusted basis. The pop in core capital goods orders sharply reduces risks of a plunge in capital spending this quarter as business waits to see how fiscal cliff issues are resolved.


There is still very little hard information about how fiscal policy negotiations are proceeding. The forecast continues to assume that negotiations are successful and that policy tightening related to fiscal cliff legislation amounts to about 1% of GDP next year, with the increase in payroll taxes the largest part. Even under this relatively benign outcome, higher payroll taxes are expected to hold real GDP growth to 1.0% saar in 1Q13 and 1.5% in 2Q13, mainly through their effects on consumer spending.


Upcoming November reports on labor market conditions, the ISM surveys, and auto sales would usually be important in conditioning views on economic performance. But it is hard to know how much the data will be affected by the after effects of Hurricane Sandy. The labor market forecast  looks for payroll employment growth to slow to 100,000 in November from an average 170,000 per month over the prior three months, mainly reflecting the destruction and lingering power outages from the hurricane. But it will be very difficult to separate effects of Sandy from underlying hiring. Similarly, the forecast looks for a modest increase in the ISM manufacturing survey to 52.0, but mainly on the view that demand temporarily will be boosted by needed supplies and materials for rebuilding. Finally, auto sales are expected to increase from a pace of 14.2 million in October to 15.0 million in November, with the improvement largely reflecting the lift from sales that had been delayed by the hurricane.

But hey: there's always the iPhone :)

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Mon, 12/03/2012 - 11:45 | 3029678 mrktwtch2
mrktwtch2's picture

how about a j phone??

Mon, 12/03/2012 - 11:51 | 3029692 American34
American34's picture

Welcome to the American Iconomy.

Mon, 12/03/2012 - 12:44 | 3029900 midtowng
midtowng's picture

An iPhone economy?!? Seriously?

Mon, 12/03/2012 - 13:01 | 3029955 hedgeless_horseman
hedgeless_horseman's picture



Understand the GDP Deflator, bitchezzz?

Mon, 12/03/2012 - 14:16 | 3030191 redpill
redpill's picture

Is that like picturing your mother-in-law naked?

Mon, 12/03/2012 - 13:55 | 3029702 TruthInSunshine
TruthInSunshine's picture

iEconomy, bitchez!

It's bringing virtual virtuous prosperity to more & more people with each passing day! Revel in its virtuousity & enjoy The Ben Bernank's Virtuous Circle, bitchez!*

*Technically, The Ben Bernank's Virtuous Circle is characterized by a repeating loop of extremely low volume equity trading @ the speed of collocated fiber optics as Primary Dealers, a select few "insider networks" powered Hedge Funds, and the central fractional reserve banks themselves swap equities back and forth with each other in an illusion of an electronic ping pong match.

Mon, 12/03/2012 - 12:26 | 3029744 prains
prains's picture

there is NO data, there are NO economists just rent seeking corptocracies looking to alter the discourse at every turn through pre-paid mouth pieces. Divide/Conquer thru Red-Blue, Left-Right, Welfare-Tax, Jew-Muslim, anything to keep the cross hairs off those doing the real theft of wealth and income. 400 Americans have more wealth than 150 million Americans, that was done with stealth, guile and a plan executed over decades. Americans have been hollowed out to the point of becoming a caricature of capitalism and still the mantra is no govt is a good govt. When actually the story should read NO 1% is a good 1%. They produce nothing, steal everything and leave americans chasing their own tails.

Mon, 12/03/2012 - 11:47 | 3029682 brewing
brewing's picture

what a joke this country is...

Mon, 12/03/2012 - 18:04 | 3030939 Poor Grogman
Poor Grogman's picture

The very idea of consumer spending being "good" for the economy,
Is like some ancient civilization thinking they can make it rain if only they sacrifice some more virgins...

This is economics "taking charge of the situation", while sheeple nod agreeably and pull out the credit card to inflict more damage on themselves.

Eventually the reality becomes unavoidable. The preists can not make It rain and there are no more virgins to sacrifice. Then it is time for the high preists to make a run for the jungle with the people in hot pursuit...

Should be fun to watch...

Mon, 12/03/2012 - 11:48 | 3029686 ebworthen
ebworthen's picture

iPhones 33% of GDP.

That's sustainable (NOT).

Mon, 12/03/2012 - 14:27 | 3030221 Overflow-admin
Overflow-admin's picture

33% of GDP growth.

Well, let me guess what are the other sustainable economy sectors contributing to GDP growth. Finance? Manufacturing? (nice inventory stuffing, GM. congratz)

Mon, 12/03/2012 - 11:50 | 3029691 tuttisaluti
tuttisaluti's picture

The US economy depends on a phone....??????

Mon, 12/03/2012 - 11:53 | 3029700 Marco
Marco's picture

No, the US economy depends on the petro-dollar system ... for which all the fundamentals, including even something as shaky as GDP, are irrelevant.

The illusion of the US economy depends on a phone.

Mon, 12/03/2012 - 12:06 | 3029752 SheepDog-One
SheepDog-One's picture

Just imagine its 1990 again, and some economist said that by the year 2012 the entire nations economy will pretty much run on portable telephone sales.....people would have captured him and put him in a loonie bin, or at least laughed him off the stage. 

Today, people just accept it as the norm.

Mon, 12/03/2012 - 12:13 | 3029776 Bay of Pigs
Bay of Pigs's picture

We should all have 7 iPhones, one for each day of the week.

That would really grow the economy...

Mon, 12/03/2012 - 12:41 | 3029891 Zap Powerz
Zap Powerz's picture

You need 7 iPhones because they are junk and break easily and when they do break you have to send them back to Apple to get fixed.

Fuck iPhone.  I do not accept their terms and conditions.

Mon, 12/03/2012 - 14:22 | 3030207 Overflow-admin
Overflow-admin's picture

Err, just my 2 cents...


Mon, 12/03/2012 - 12:37 | 3029879 Zap Powerz
Zap Powerz's picture

The US economy depends on a phone made in China.  How's that make ya feel?

Mon, 12/03/2012 - 12:38 | 3029882 Chupacabra-322
Chupacabra-322's picture

@ tuttisaluti,

yea, an Obama phone.  How about an iShit?  iShit on the Criminal Federal Government, Globalist and NWO cronies.

Mon, 12/03/2012 - 11:51 | 3029693 youngman
youngman's picture

Boy are going to fall hard.....if thats all we got...

Mon, 12/03/2012 - 11:51 | 3029694 Everybodys All ...
Everybodys All American's picture

In years gone by this sort of information or data would send the market into a huge selloff.

Mon, 12/03/2012 - 11:52 | 3029699 Quinvarius
Quinvarius's picture

JPM has never been very coherent or good at math.

Mon, 12/03/2012 - 11:54 | 3029706 Everybodys All ...
Everybodys All American's picture

therefore it makes sense that they are Obama's banker.

Mon, 12/03/2012 - 11:54 | 3029703 Dr. Engali
Dr. Engali's picture

In order to have a GDP...we have to make stuff not consume it.

Mon, 12/03/2012 - 11:55 | 3029709 Glass Seagull
Glass Seagull's picture

Then one begins to think about how many iPhones are purchased on revolving consumer credit.

Then one swallows one's own tongue (while standing in line at the Apple store, no doubt).



Mon, 12/03/2012 - 12:03 | 3029738 SheepDog-One
SheepDog-One's picture


Mon, 12/03/2012 - 12:10 | 3029765 DavidJ
DavidJ's picture

Forget housing and car sales, it is all about the smartphones. 


Smartphone, the new American Dream. 


As long as I can pay more attention to my slick smartphone than my family members, friends and coworkers, the US economy is saved!



Mon, 12/03/2012 - 12:20 | 3029816 Hobbleknee
Hobbleknee's picture

And these numbers still aren't anywhere near the rates that were needed to make their fake spending cuts.

Mon, 12/03/2012 - 12:39 | 3029883 Zap Powerz
Zap Powerz's picture

My girlfriend needs a new phone.  Im going to buy her one for chistmas.  The phone I will buy will not be an iPhone.  Sorry to fuck up the economy, but Im just doing my part to crash this house of cards.

Mon, 12/03/2012 - 13:20 | 3030016 ptoemmes
ptoemmes's picture

At what point in the distribuition chain is the value of an iPhone established to affect GDP?  The MSRP on the iPhone 5 is $850.00 (64GB model) and subsidized, for example, at AT&T anywhere from $199.00 (16GB) - $399.00 (64GB) based on model.

Mon, 12/03/2012 - 13:35 | 3030048 Wardley
Wardley's picture

You went full retard, man. Never go full retard.

Do NOT follow this link or you will be banned from the site!