Puerto Rico government has confirmed that it failed to make a debt payment at the weekend, in the latest sign of the economic crisis in the US territory.
It said it did not have the funds available to pay more than $50 million due on bonds.
The ratings agency Moody’s said it viewed the development as a default.
Puerto Rico’s governor said in June that the island’s debts of more than $70 billion were unpayable and that its finances needed restructuring.
The US commonwealth paid only $628,000 of a $58 million payment due on its Public Finance Corp (PFC) bonds, Government Development Bank President Melba Acosta Febo said in a statement on August 3.
Melba Acosta Febo said the reason was because the legislature did not appropriate sufficient funds.
The government said on July 31 that although it would not complete the full payment, it should not be considered a default under a technical definition of the phrase. But that argument has been discounted by Moody’s and other financial institutions.
Puerto Rico has $72 billion of public debt. That makes it by far the most indebted territory or state per capita in the United States.
Unemployment is at almost 14% – more than double the national average – and over the last decade there has been little or no growth, resulting in the economy teetering on the brink of oblivion.
Puerto Rico has been losing 1% (around 30,000 people) a year to Florida and other parts of the US. And it is mainly the economically active young who are leaving.
The government has rejected recommendations made by some economists from the International Monetary Fund (IMF) that employers should pay less than the federal minimum wage of $7.25 per hour.
There is also resistance to cutting the bloated public sector, which accounts for almost 20% of the workforce.
According to Labor Department latest figures, the US economy added 321,000 jobs in November, while the unemployment rate stayed at 5.8%.
The number of jobs created was well above analysts’ forecasts of about 225,000 new jobs in the month.
US employers have added at least 200,000 jobs for 10 months in a row, the longest period of jobs growth since 1995.
The number of jobs created has averaged 241,000 a month this year.
The Labor Department added that 44,000 more jobs were created in September and October combined than the government had previously estimated.
Stronger job creation has yet to lead to a significant increase in salaries.
Analysts said the US economy would continue to improve, despite lower global growth expectations.
They added that companies hiring temporary workers for the winter holidays could be providing a boost to the overall jobs figure.
The US economy is less dependent on exports than Germany, China and Japan, but is more reliant on domestic consumer spending.
Delivery firms have announced ambitious recruitment plans. UPS has said it expects to add up to 95,000 seasonal workers, up from 85,000 last year. FedEx plans to hire 50,000, up from 40,000.
The National Retail Federation estimates that seasonal retail hiring could grow by about 4% to as much as 800,000.
Most recent figures suggest Americans are buying more cars, which is likely to keep factories busy in coming months. Auto sales last month rose to their second-fastest pace this year. Car sales are on track to rise 6% this year from 2013.
The economy is expected to slow in the final three months of the year to an annualized growth rate of 2.5%, down from 4.3% from April to September.
Meanwhile, the US trade deficit fell slightly in October, as exports rebounded, while oil imports dipped to the lowest level in five years.
The deficit edged down 0.4% to $43.4 billion, as against a revised $43.6 billion in September, the Commerce Department reported.
Exports climbed 1.2% to $197.5 billion, recovering after a September dip.
Imports also rose by 0.9% to $241 billion, but that increase was tempered by a 0.6% fall in imports of petroleum, which dropped to the lowest level since November 2009.
The US unemployment rate has fallen to 5.8% after the economy added 214,000 jobs in October 2014, official Labor Department figures show.
The number of jobs created is slightly below forecasts of about 230,000 new posts, but still indicates a healthy US jobs market.
The figures are a significant gauge of the health of the economy.
US employers have added at least 200,000 jobs for nine months in a row, the longest growth period since 1995.
Jobs figures for August and September were also revised higher.
The US unemployment rate has fallen to 5.8 percent in October 2014
The burst of hiring lowered the unemployment rate to 5.8% from 5.9%. That is the lowest rate since July 2008.
Shares in New York were down shortly after the start of trading. The Dow Jones was 0.28% lower at 17505.28.
The number of unemployed in the US has dropped to 8.995 million, below nine million for the first time in six years.
The work force participation rate, which counts those with jobs and those actively seeking jobs, was barely changed in October at 62.8%.
The financial crisis of 2008 has dented that rate, with some people simply giving up the search for work.
Although economic growth has picked up this year and job opportunities with it, this week’s mid-term elections revealed employment was voters’ top worry, suggesting many Americans have not yet felt any improvement.
The US economy grew at an annual rate of 3.5% in Q3 2014, the Commerce Department has announced.
That was better than the 3% pace that economists had been expecting and follows the 4.6% growth rate recorded in Q2 2014.
Strong export growth and higher government spending helped to boost growth in Q3.
In a sign of confidence in the US recovery, on October 29 the Federal Reserve ended its stimulus scheme.
The fall in the unemployment rate to a six-year low has helped to boost that confidence.
“Today’s number represents a return to a healthy-looking trend. The most recent IMF forecasts suggest the US economy will grow 3.1% next year and 3.0% in 2016, and these could be revised further upwards in the coming months,” said Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers.
The US economy grew at an annual rate of 3.5 percent in Q3 2014
The report was the first of three estimates of gross domestic product, so the figure could be revised up or down, over the coming months.
Growth was lifted in the third quarter by a sharp increase in government spending, which itself was boosted by a surge in defense expenditure.
Exports were another area of strength, they rose at an annual rate of 7.8%.
There will be a question over whether that pace can be maintained as important export markets for the US are struggling.
Growth in many European countries is stagnant and the Chinese economy is slowing down.
Consumption growth was relatively weak in the third quarter, running at an annual rate of 1.8%, but economists expect that to improve.
Overall it has been a volatile year for US growth data.
In Q1 2014 the economy contracted at an annual rate of 2.1% after severe weather hampered economic activity.
But Q2 2014 saw a rebound, growing at an annual pace of 4.6%.
Taken together the latest two quarters are the strongest consecutive quarters of growth since the second half of 2003.
On October 29 the Fed announced the end of its quantitative easing (QE) stimulus program.
QE started in November 2008 amid the financial crisis and fears that the US, and the rest of the world, might be facing another great depression.
Since then the Fed has bought $3.5 trillion of US government debt and bonds created out of home loans or mortgages.
It began to phase out the scheme last year and a fall in unemployment to 5.9% has encouraged the Fed to end it altogether.
However, interest rates will remain at a record low for a “considerable time” according to the US central bank.
The US unemployment rate fell from 6.1% in August 2014 to 5.9% in September 2014, official figures have shown.
The rate is the lowest recorded since July 2008.
US Labor Department also said that employers added 248,000 jobs last month, and the job growth figures for August and July were revised upwards.
The jobs figures are seen as a significant gauge of the health of the economy and there has been much debate over when US interest rates will rise.
The US Federal Reserve has kept interest rates close to zero since the financial crisis in 2008.
US markets cheered the news, with the Dow Jones Industrial Average rising over 100 points.
The US dollar was pushed higher as expectations rose that interest rates would go up sooner than previously predicted.
The US unemployment rate in September 2014 is the lowest recorded since July 2008 (photo AP)
“The most important item in this report is the drop in the unemployment rate below 6%. [Fed Chair Janet] Yellen has said there is only so much slack if the unemployment rate falls below 6%,” said Christopher Low, chief economist at FTN Financial in New York.
The Fed’s stimulus program, known as “quantitative easing”, is due to end this month. Its aim was to keep long-term interest rates low using the purchase of bonds, and thus to boost spending.
The Federal Reserve has indicated it will raise short term interest rates if the economy continues to grow. Janet Yellen has given no firm date for the rise, but the Fed has said the move will come a “considerable time” after the stimulus program ends.
The Labor Department said 69,000 more jobs were created in July and August than previously estimated. It also said nearly 100,000 jobseekers stopped looking for work in September.
The largest rise in employment was in professional and business services, including management and legal services, which saw an increase of 81,000 jobs in September.
The retail sector added 35,000 jobs compared with the previous month. Employment in the health care, construction and leisure and hospitality sectors also continued to increase.
According to the latest figures from the Bureau of Labor Statistics, the US economy added 142,000 jobs in August 2014, less than the lowest estimate.
The unemployment rate dipped to 6.1% from 6.2% in July 2014.
The world’s largest economy had been averaging a monthly jobs gain of 212,000 in the previous 12 months.
Part of the sluggish jobs growth was attributed to a loss of 17,000 food and beverage jobs as a result of a supermarket store strike.
Thousands of employees of the Market Basket chain of supermarkets in the northeastern US had gone on strike in July to protest the firing of their boss. The dispute was resolved late last week.
US markets did not react strongly to the news, with all three indexes dipping just slightly lower in early morning trading in New York.
The US economy added 142,000 jobs in August 2014, less than the lowest estimate
There were some bright spots in the August jobs report: wage growth, a crucial sign of the strength of the US economy, ticked up slightly.
Average hourly earnings are now growing at 2.1% year over year. US Federal Reserve chair Janet Yellen has previously indicated that wages are a crucial factor in the Fed’s analysis of the state of the health of the US jobs market.
Employment in the car industry also dipped less than expected, as fewer workers were laid off for factory retooling.
Jobs growth in the professional and business services also continued to lead the recovery, with an additional 47,000 jobs adding in August, bringing the yearly total to 639,000.
Most analysts believe that the sluggish August figure will give central bankers pause for thought as they consider when to end the Fed’s extraordinary support of the US economy.
The Fed is scheduled to meet on September 16-17.
Many have wondered whether or not so-called “hawks”, who favor increasing interest rates, would be able to persuade other members of the committee to move forward the bank’s plans to raise interest rates from their historically low levels of 0%.
The US economy added 209,000 jobs in July bringing the unemployment rate to 6.2%, latest data from the Bureau of Labor Statistics has shown.
The biggest job gains were in professional business services and manufacturing jobs.
On Wednesday, the Commerce Department said the US economy grew by a better-than-expected 4% during the April-to-June period.
In an encouraging sign, the number of people in the US labor market increased slightly, meaning that workers who may have given up looking for a job have now begun to re-enter the jobs market.
The May and June jobs data were also revised upwards to show that the US economy added 15,000 more jobs.
Some economists had been expecting even larger figures, and US stock markets were down on the less-than-expected gains.
The US economy added 209,000 jobs in July bringing the unemployment rate to 6.2 percent
The Dow dropped nearly 80 points, following steep losses the day before.
Nonetheless, most analysts agreed that there was nothing obviously negative about the report.
July is often one of the weaker months for jobs growth, which is one possible reason for the uptick in the unemployment rate.
However, the figures are encouraging, as the US economy needs to add at least 150,000 jobs each month simply to keep up with population growth.
This is the sixth straight month that the US economy has added more than 200,000 jobs.
Yet there are still reasons to be concerned: wage growth remains flat and the number of long-term unemployed – those out of work for longer than six months – was essentially unchanged at 3.2 million, or a third of those looking for work.
US Federal Reserve chair Janet Yellen recently highlighted that while the employment data is certain better than in the aftermath of the 2008-2009 recession, challenges remain.
According to latest figures from the Bureau of Labor Statistics, the US economy added 288,000 jobs in June 2014.
The unemployment rate dropped to 6.1%, its lowest level since September 2008.
That figure beat analysts’ expectations and is an encouraging sign after disappointing growth in the first quarter of 2014.
The strong report sent the Dow Jones Industrial Average above 17,000 for the first time as investors cheered the news.
The US economy added 288,000 jobs in June 2014
Economists blamed harsh winter weather for a 2.9% annualized decline in US economic output from January to March.
Jobs growth in professional and business services was particularly strong, with 67,000 jobs being created, followed by gains in the retail sector, which added 40,000 jobs.
Hourly wages – which is a measure watched closely by policy makers and has been recently highlight by Federal Reserve chair Janet Yellen – rose 0.2% in June and have climbed 2.0% for the year.
“There really isn’t anything to be disappointed with,” wrote Jefferies bank economists in a note to clients, noting that manufacturing jobs growth was particularly strong.
“There was a 0.2% dip in the unemployment rate based on “good reasons” and household employment was up strongly,” they added.
One “good reason” was that unlike in past reports, where the unemployment rate has dipped primarily because many Americans had given up looking for work, the June decline seems to be mostly due to actual jobs growth.
The labor force participation rate remained steady at 62.8%, indicating that decline was not due to discouraged workers.
However, long-term unemployment remains an ongoing concern.
The number of US job-seekers who have been out of work for over 27 weeks decreased by 293,000 in June, to 3.1 million people – around a third of those who are out of work.
The US economy contracted in 2014 Q1 to an annualized rate of 1%, official estimates have shown.
It is the worst economic performance since 2011 Q1.
It is also a big fall on the 2.6% rise in economic output in 2013 Q4.
The US Commerce Department’s first reading of gross domestic product (GDP) showed the economy grew at an annualized rate of just 0.1%.
The US economy contracted in 2014 Q1 to an annualized rate of 1 percent
The fall in output was blamed on an unusually cold and disruptive winter – one of the coldest in the US for 20 years – and a plunge in business investment.
Economists estimate the weather could have cost up to 1.5 percentage points of GDP.
However, the Commerce’s Department’s report did not estimate the effect of the winter weather.
The fall was also twice as big as economists expected.
Most Wall Street analysts had forecast the economy to contract by around 0.5%.
But the Commerce Department said there was already evidence that the economy was rebounding, with data ranging from employment to manufacturing activity already pointing to a sharp acceleration in economic activity in the second quarter.
Tumbling exports, while not as severe as initially thought, combined with stronger imports in the first quarter resulted in a larger than expected trade deficit which shaved 0.95 percentage points off US economic output.
Consumer spending, which accounts for more than two-thirds of US economic activity, increased by 3.1%, which was revised up slightly from 3% in the first estimate.
Business spending on non-residential structures, such as gas drilling, fell by 7.5%. It had previously been reported to have increased by 0.2%.
The report showed corporate pre-tax profits also plunged 13.7% in 2014Q1, the biggest drop since the fourth quarter of 2008.
The White House said the GDP revision was subject to a number of notable influences, including the severe winter weather, which temporarily lowered growth.
It added: “The President will do everything he can either by acting through executive action or by working with Congress to push for steps that would raise growth and accelerate job creation, including fully paid-for investments in infrastructure, education and research, a reinstatement of extended unemployment insurance benefits, and an increase in the minimum wage.”
US economic growth slowed sharply in 2014 Q1, growing at an annual rate of 0.1%.
The rate is the slowest for a year and a large fall on the 2.6% increase in gross domestic product (GDP) in the final quarter of last year.
An unusually cold and disruptive winter, coupled with tumbling exports, contributed to the decline, the US Commerce Department said.
But it said economic activity already appeared to be bouncing back.
Business investment fell by 2.1%, with spending on equipment plunging by 5.5% at an annual rate compared with a year earlier.
Residential construction, which was inevitably hit by the unusually cold winter fell by 5.7% although it was also hit by higher house prices and a shortage of available homes for sale.
US economic growth slowed sharply in 2014 Q1
The US trade deficit widened, thanks to a sharp fall in exports which shaved growth by 0.8 percentage points in the first quarter. Businesses also slowed their restocking, with a slowdown in inventory rebuilding reducing growth by nearly 0.6 percentage points.
But consumer spending – which drives 70% of growth in the US economy – grew by 3%, although the increase was dominated by a 4.4% rise in spending on services, reflecting higher utility bills during the bitterly cold winter.
A cutback in spending by state and local governments also helped offset a rebound in federal activity after the 16-day partial government shutdown last year.
But most economists expect a strong rebound in growth in the April-June quarter. The consensus view is the economy will expand by 3% in the second quarter.
Analysts said stronger growth will endure through the rest of the year as the economy derives help from improved job growth, rising consumer spending and a rebound in business investment.
In fact, many analysts believe 2014 will be the year the recovery from recession finally achieves the robust growth needed to accelerate hiring and reduce still-high unemployment.
If the economy rebounds as strongly as they suggest, it will have experienced the fastest annual expansion in the economy in nine years.
The last time growth was as strong was in 2005, when GDP grew 3.4%, two years before the nation fell into the worst recession since the 1930s.
Unemployment is expected to fall to 6.2% by the end of this year from 6.7% in March.
The growth figures come a few hours before a policy statement from the US Federal Reserve, the country’s central bank.
But few expect the disappointing news to have any impact on the scaling back of the Fed’s economic stimulus, which has seen it cut bond purchases by $10 billion per month.
According to US Labor Department figures, the US economy added 175,000 new jobs in February, but the unemployment rate rose slightly to 6.7%.
The jobs figures were better than many had been expecting and marked a rebound from two weak months.
It had been thought the figures would be affected by recent harsh weather, which had hit much of the country.
But the unemployment rate, based on different statistics, went up slightly from January’s 6.6% to 6.7%.
February’s jobs figure – known as non-farm payrolls and based on a survey of employers – compares with the 129,000 new jobs created in January.
Analysts had been expecting a rise of about 150,000 last month.
A large chunk of the gains came from financial and other services, which were responsible for an extra 79,000 jobs.
February 2014 jobs figures were better than many had been expecting and marked a rebound from two weak months
Construction companies, many of which had been affected by the bad weather, added 15,000 jobs.
But the information sector lost 16,000 jobs, most of them in film and sound recording.
Average hourly earnings in the private sector rose by 3.7%, or about nine cents, to $24.31, the figures show. Over the year, average hourly earnings have risen by 2.2%.
The unemployment rate is calculated from a different survey, of households, and rose slightly from its lowest level since October 2008. It leaves the total number of unemployed relatively unchanged at 10.5 million.
However, the same survey shows the number of long-term unemployed (defined as those jobless for 27 weeks or more) increased by 203,000 in February to 3.8 million.
Cold and snowy weather, which has disrupted much of the country, was one of the reasons 601,000 people with jobs stayed at home last month, according to the survey.
The US Federal Reserve has said the severe winter was to blame for recent weaknesses in jobs numbers, retail sales and housebuilding.
Analysts see the latest figures as further evidence the apparent slowdown was only a blip.
The stronger-than-expected figures are likely to mean the Federal Reserve will continue to withdraw extra support from the economy – a process known as tapering.
The Fed had been spending $85 billion a month buying bonds, but has now reduced that to $65 billion and plans to cut the program by $10 billion each month.
The US economy unexpectedly shrank at an annualized rate of 0.1% in Q4 2012, initial official estimates indicate.
If confirmed, it would be the first contraction logged by the US economy since the 2009 global recession.
The world’s largest economy grew 3.1% in July to September.
The fourth quarter period was dominated by the “fiscal cliff” – the spending cuts and tax rises that had been due to come into force from January 1st, 2013.
These were avoided by a last-minute deal between the Republican-dominated Congress and the White House. However, economists warned at the time that fears of an abrupt cut in government spending were undermining business and consumer confidence.
However, part of that deal includes tax rises for the highest-earning Americans and – more significantly for the economy – the expiry of a payroll tax holiday for all US employees, something which is widely expected by economists to further weigh on growth during the current quarter.
The fourth-quarter shrinkage in economic output comes as a shock to analysts on Wall Street, who had been expecting 1.1% growth according to a poll by news agency Reuters. Not one economist surveyed had predicted an economic contraction.
It will add to pressure on the US Federal Reserve to do more to stimulate the economy. Members of its Federal Open Markets Committee are due to announce the conclusions of their latest policy-setting meeting later on Wednesday, and will have had an advance look at the economic data.
Growth was dragged down by a 22% cut in the federal government’s defence spending – the biggest since 1972, when the US was winding down from the end of the Vietnam War – and by the decision of many businesses to halt the rapid rebuilding of their inventories that began over the summer.
These two relatively volatile components of the data subtracted a combined 2.6 percentage points from the overall growth figure.
The US economy unexpectedly shrank at an annualized rate of 0.1 percent in Q4 2012, initial official estimates indicate
Consumer spending did pick up, as did business investment, suggesting that the economy may have some underlying momentum. Sales of computers and cars both made positive contributions to the economy’s performance.
Residential investment also grew 15%, adding to evidence that the housing market has finally turned the corner.
“Frankly, this is the best-looking contraction in US [gross domestic product] you’ll ever see,” said Paul Ashworth, an economist at Capital Economics, in a note to clients.
“The drag from defence spending and inventories is a one-off. The rest of the report is all encouraging.”
The October-to-December period was also negatively affected by Storm Sandy, which caused the closure of many factories and businesses in the New York area, and by a sharp drop in exports.
Growth for 2012 as a whole came in at 2.2%, up from 1.8% in 2011, but still unusually slow compared with previous economic recoveries in the US following recessions in the post-War era.
Looking ahead, domestic spending in the current quarter is expected to be dogged by further uncertainty over the federal government’s tax and spending.
Workers have already experienced a 2% average cut in their take-home pay, due to the expiry of the payroll tax holiday. That means a household earning $50,000 a year will have about $1,000 less to spend.
The income lost is likely to have been behind a sharp fall in consumer confidence recorded by surveys in January.
Meanwhile, the recently re-elected President Barack Obama and Congress are expected to clash once again in the coming months over the debt ceiling.
The US Treasury is approaching the $16.4 trillion legal limit on its total debt, and must gain permission from Congress to borrow the money needed for it to continue meeting its bills.
Last time there was a stand-off over the issue, in the summer of 2011, the political deadlock prompted ratings agency Standard & Poor’s to deprive the US of its top AAA rating, a move that sent stock markets sharply lower.
The US House of Representatives has passed a bill to extend the country’s debt limit until May, deferring the budget debate for a few months at least.
The US economy grew more than expected in the third quarter, official figures showed.
The world’s largest economy expanded at an annualized rate of 2% in the third quarter, the Commerce Department said.
The jump was partly due to a large increase in government spending.
The figures are one of the last pieces of important economic data before the US presidential election between Barack Obama and his challenger Mitt Romney on 6 November.
Federal government expenditures and gross investment increased 9.6% compared with the previous quarter, while national defence spending rose by 13%. The Commerce Department said there was a jump in personal consumption as well.
A drought in the US, which was the worst for 50 years, cut farm output and took 0.4 percentage points off the GDP figures, the Commerce Department said.
With more than 20 million Americans unemployed and a huge public deficit, the economy has become one of the central issues of the campaign.
The US has now been growing for more than three years, since June 2009.
“While we have more work to do, together with other economic indicators, this report provides further evidence that the economy is moving in the right direction,” said Alan Krueger, chairman of PresidentBarack Obama’s Council of Economic Advisers.
But the Romney camp was not impressed.
“Slow economic growth means slow job growth and declining take-home pay,” Mitt Romney said in a statement.
“This is what four years of President Obama’s policies have produced.”
Speaking at a rally on Friday in the state of Iowa he said the growth figure was disappointing and that he could do better.
Mitt Romney has repeatedly challenged President Barack Obama’s record, saying ”we have not made the progress we need to make”.
“If the president were re-elected, we’d go to almost $20 trillion of national debt. This puts us on a road to Greece,” Mitt Romney said during the second presidential debate.
Barack Obama replied that his opponent did not have a five-point plan to fix the economy, but ”a one-point plan”.
Last month, the US unemployment rate fell to 7.8%, down from 8.1%, its lowest since January 2009 when Barack Obama’s term in office began.
Nigel Gault, chief US economist at IHS Global Insight, said: “There is prospect that we could do better next year if we could clear up some of the uncertainties, particularly the fiscal cliff.
“A lot of the ingredients for stronger growth are falling into place, particularly the gradual easing of credit conditions and the improvement in the housing market.”
The “fiscal cliff” refers to automatic tax hikes and government spending cuts that were agreed by Democrats and Republicans during the last budget face-off. They will drain about $600 billion out of the economy next year, possibly plunging the US economy into unless action is taken by Congress.
Chris Williamson, chief economist at financial research firm Markit, said there was no certainty that this pace of growth would be maintained: “It remains too early to tell whether growth will accelerate or slow in the fourth quarter.
“However, it seems unlikely that the consumer mood will continue to brighten if not supported by evidence that the corporate sector is also seeing stronger growth, suggesting there are downside risks and the GDP growth rate could slow from the third quarter’s 2% pace.”
To help get the US economy back on track, the US Federal Reserve in September restarted its policy of pumping money into the economy via quantitative easing. The Fed pledged to buy $40bn of mortgage debt a month, with the aim of reducing long-term borrowing costs for firms and households.
“Growth was fairly resilient,” said Christopher Vecchio, a currency analyst at DailyFX, but “nevertheless, this is still not the stable recovery the Federal Reserve is looking for”.
Recent housing data has also shown some encouraging signs of recovery, analysts say.
Sales of existing homes and housing construction have picked up and the main home price index has risen consecutively for three months.
House prices have rebounded in some areas, while mortgage rates are expected to stay at record lows because of low interest rates.
The Fed has vowed to keep rates at the current levels of close to zero until 2015.
The economy grew by 1.3% in the previous quarter. The US states its growth in annualized terms, meaning that its quarterly growth rate is extrapolated as if it was growing at that pace for the whole year.
Figures for the eurozone have not yet been released but Germany is expecting a “noticeable expansion” and debt-ridden nations like Spain and Greece will likely have shrunk again.
China, the world’s second-biggest economy, also uses an annualized rate of growth. It expanded 7.4% in the third quarter.
Apple fans aren’t the only people chomping at the bit for the new iPhone to be released but now American economists are excited about the expected unveiling of the latest version because they think it will boost the US economy.
The next generation iPhone 5, which Apple plans to release on Wednesday, could not only boost the tech giant’s bottom line but could give a significant boost to the overall US economy.
Sales of the iPhone 5 could add between a quarter and a half percentage point to fourth quarter annualized growth in the US, according to J.P. Morgan’s chief economist, Michael Feroli in a note to clients on Monday.
Such an impact would be significant.
The next generation iPhone 5 could not only boost Apple's bottom line but could give a significant boost to the overall US economy
“Calculated using the so-called retail control method, sales of iPhone 5 could boost annualized GDP growth by $3.2 billion, or $12.8 billion at an annual rate,” Michael Feroli wrote.
That 0.33 percentage-point boost, he added, “would limit the downside risk to our Q4 GDP growth protection, which remains 2.0 percent”.
Michael Feroli laid out his math. J.P. Morgan’s analysts expect Apple to sell around 8 million iPhone 5s in the fourth quarter. They expect the sales price to be about $600.
With about $200 in discounted import component costs, the government can factor in $400 per phone into its measure of gross domestic product for the fourth quarter.
Michael Feroli said the estimate of between a quarter to a half point of annualized GDP “seems fairly large, and for that reason should be treated skeptically”.
But, he added, “we think the recent evidence is consistent with this projection”.
Michael Feroli said that when the last iPhone was launched in October 2011, sales significantly outperformed expectations.
“Given the iPhone 5 launch is expected to be much larger, we think the estimate mentioned … is reasonable,” Michael Feroli wrote.
According to a recent Reuters poll of Wall Street dealers and economists, US GDP was seen at 2.0% on average in 2013, down slightly from estimates this summer.
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