The impact of the Apple juggernaut on earnings is already well known: as Reuters previously calculated, following the announcement of Apple's results earlier this week, S&P 500 Q4 revenue growth tripled to 1.4% from 0.5% the day before; while if one excludes AAPL S&P500 revenue growth falls to 0.8%.
But what about the impact of Apple on macroeconomics? For a good example we look at Hong Kong Q4 retail sales. As a reminder, in Q4, the Hong Kong economy was substantially impacted due to the Occupy Central movement peaking (and then suffering the same fate as its US peer, when it faded into obscurity), and many predicted the domestic economy would tumble if only until the impact of the city stoppage washed away.
As it turns out, most of those predictions were correct, however one place where pessimism was unfounded was in retail sales. The reason: the Apple iPhone 6.
UBS explains:
The launch of the popular iPhone 6 by Apple in September 2014 was the biggest, and perhaps the only, positive driver for Hong Kong's retail sector during late 2014. Thanks largely to Apple, retail sales grew better than expected at 3.5%y/y in value terms during September and November 2014, despite the temporary disruption from the 'Occupy Central' demonstration. The sales of iPhone, which are captured in other consumer durable sales, grew on average 60%y/y since September, propelled predominately by the launch of new product.
Excluding iPhones, retail sales value would have contracted almost 1%y/y in October, at the peak of the 'Occupy' movement, and expanded a more subdued 1.3%y/y during Sep-Nov 14 (see figure 1). In other words, over 60% of retail sales growth was attributable to iPhone in late 2014.
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The strong demand for iPhone has mostly come from the Chinese tourists. The iPhone 6 was launched about a month earlier in Hong Kong (19 September versus 17 October in China). And the selling prices of which are also lower here, making the arbitrage trade profitable (buys in HK; sells in China). Those who live in Hong Kong will be very familiar with the long queues snapping up the phone as well as the big crowds outside the Apple stores trying to make a quick profitable trade.
This explained why tourist arrivals (over 80% of them Chinese) accelerated to 13%y/y during Sep-Nov 14, bucking the 'Occupy Central' disruption, as the timing of which happened to coincide with the iPhone euphoria. The incentives to buy the gadget before the Chinese launch or to gain from arbitrage trade have attracted many Chinese tourists since September. Most of them are day trippers. This is reflected in the average 18%y/y expansion in same-day visitor arrivals since September, which is up from 13.6%y/y in the three months before the iPhone launch. Overnight visitors, however, continued to ease and expand at mid-single digit pace (see figure 2). In particular, non-Mainland Chinese tourist, mostly overnight visitors, contracted in 4Q14. Both the share and, more recently, the absolute level of non-Chinese arrivals have been shrinking. As far as tourism is concerned, Hong Kong can hardly claim to be Asia's world city anymore.
In other words, if anything were to ever happen to the Apple "magic", not only does the S&P get it, but the macroeconomic ripple across the entire world will likely lead to a mini-recession all of its own.
