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Top Business Stories: Apple iPhone 5 could boost U.S. GDP by $3.2-billion in quarter, JPMorgan says Add to ...

These are stories Report on Business is following Monday, Sept. 10, 2012.

Follow Michael Babad and the Globe’s top business stories on Twitter.

The value of the iPhone
JPMorgan Chase & Co. believes the next generation of the iPhone could have a noticeable impact on the struggling U.S. economy in the fourth quarter of the year.

Apple Inc. is widely expected Wednesday to unveil the iPhone 5 on Wednesday, which JPMorgan's Michael Feroli says could add between one-quarter of a percentage point to half a point to gross domestic product, annualized, in the last three months of the year.

On a dollar basis, he estimates the economy's gain at $3.2-billion (U.S.), or $12.8-billion annualized.

"Our equity analysts believe around 8 million iPhone 5s will be sold in the U.S. in Q4, even while sales of previous generation iPhones are maintained at a solid pace," Mr. Feroli said in a research note.

While the price of the phone is unknown, previous launches would put it at some $600, he said. If you take away the "imported cost component," you're left with $400, the amount that figures into GDP, he said.

"Thus, calculated using the so-called retail control method, sales of iPhone 5 could boost Q4 GDP by $3.2-billion, or $12.8-billion at an annual rate," Mr. Feroli said.

"This would boost annualized GDP growth in Q4 by 0.33 of a percent point. If hedonically-adjusted constant quality prices of phones declined due to newer or better features - a reasonable conjecture - then the lift would be even greater, though past iPhone releases don't bear a visible impact on the relevant CPI components."

Attentions shoppers
Expect another rush in cross-border shopping as the Canadian dollar remains strong, and is expected to go further still.

The loonie closed today at over $1.02 U.S. It has been buoyed by speculation over U.S. monetary policy and a Canadian central bank that still plans a rate hike at some point.

That means, of course, that the currency buys more in the U.S. Not only that, but there are also new rules that boosted the level of duty-free exemptions for Canadians coming back across the border.

Canadian shopping in the United States was already on the upswing.

Overnight trips by Canadians to the United States climbed in June by 7.5 per cent to the highest since 1972, according to the latest data from Statistics Canada.

Most of that was by car, traditionally a sign of cross-border shopping. Indeed, Canadians took 1.2 million overnight trips to the U.S. in June, the highest in almost two decades.

New rules that came into effect in June allow Canadians returning from one day away to bring back $200 in goods, up from the earlier $50. Canadians away for at least two days can now bring in up to $800 worth, double the previous amount.

Deputy chief economist Douglas Porter of BMO Nesbitt Burns expects cross-border shopping to pick up even more. The stronger the loonie, the more it acts as a "red flag" for comparison shoppers, he said, also citing the new duty-free rules.

While Christmas shopping is still a ways off, there will be the usual frenzy around "Black Friday" during the Thanksgiving holiday in the U.S. in November. "That might be the next big target," Mr. Porter said.

Several factors are playing into the strength of the loonie today, notably the Bank of Canada's signal that its next move, when it comes, will be a hike in interest rates, and expectations of another round of stimulus from the Federal Reserve.

Markets expect the U.S. central bank to announce another round of quantitative easing - dubbed QE3 - as early as this week. Speculation is generally holding down the U.S. dollar, said senior currency strategist Camilla Sutton of Bank of Nova Scotia. Having said that, the U.S. dollar  is up slightly today.

"With the BoC maintaining a hawkish tone last week and the Fed expected to launch another round of QE this week, the combined impact is bullish [Canadian dollar]," Ms. Sutton said.

Given that this week is packed with events - the Fed announces its decision Thursday - the dollar could hit $1.03 this week, she added.

"The Canadian dollar can do no wrong," added BMO's Mr. Porter, noting that the currency is now almost 6 per cent above the lows of about three months ago.

"It brushed off the inconclusive Quebec election results last week, thrived on the rally in risk assets, and feasted on the mix of decent Canadian jobs/slack U.S. jobs."

Economists Craig Wright, Paul Ferley, Dawn Desjardins and Nathan Janzen predicted in a new report today that the Canadian dollar will hit $1.04 by the end of next year.

“To be sure, Canada’s solid economic underpinnings, elevated commodity prices, and growing expectations that the policy rate will be boosted in 2013 were behind the rise in the Canadian dollar beyond parity with its U.S. counterpart,” they said.

“Even the gyrations in commodity prices failed to dampen inflows from foreign investors into Canadian assets,” they said in their market outlook.

“In the 12 months ended June 2012, foreign investors bought $89.6-billion of Canadian portfolio securities, the majority of which were fixed income, and of the fixed income component, federal government bonds accounted for 46 per cent.”

New CEO at Talisman
Canada's Talisman Energy Inc. appointed a new CEO today, though was mum on the reason for the change at the top.

John Manzoni resigned, effective immediately, the energy company said, replaced by Hal Kvisle, a current director of Talisman and the former chief of TransCanada Corp.

"John has made a significant contribution to Talisman since he joined the company in 2007," the company said of Mr. Manzoni.

"Since that time, Talisman successfully entered the unconventional business, establishing a substantial presence in some of the best shale plays in North America."

In its latest quarter, Talisman's profit slumped to $196-million (U.S.) or 19 cents a share, well down from the $698-million or 68 cents a year earlier.

As Streetwise columnist Boyd Erman reported in late August, West Face Capital, an activist hedge fund, has snagged about 1 per cent of Talisman, while the Ontario Teachers' Pension Plan recently boosted its stake in the company to 1.7 per cent.

China numbers weigh
China's latest trade numbers have disappointed investors, so much so  that some economists are revising their projections for economic growth this year.

Notable for the rest of the world, commodities exporters in particular, is that the latest data showed imports slipping 2.6 per cent in August from a year earlier. Exports rose by 2.7 per cent.

"Imports for processing and re-export actually increased but this was offset by a drop in imports for domestic use, particularly commodities," which fell 7.5 per cent month over month," said chief Asia economist Mark Williams of Capital Economics.

Mr. Williams now takes a dimmer view of China's outlook, projecting growth to slow to 7.1 per cent, year over year, in the current quarter, down from 7.6 per cent in the second quarter. He now pegs annual growth at 7.6 per cent, down from his earlier forecast of 8 per cent.

He also expects growth of 8 per cent next year.

"The recent resilience of the labour market helps explain why officials still seem relaxed about the downturn," he said.

"We think this makes sense and that GDP growth close to 8 per cent is what we should now expect from China. But such an outturn would disappoint those expecting a return to growth of 9 per cent or more."

Some economists believe Beijing will respond with further stimulus.

Spectra, BG eye pipeline
Spectra Energy Corp. and BG Group PLC are proposing a giant new pipeline to carry natural gas to the British Columbia coast for export to Pacific markets, The Globe and Mail's Nathan VanderKlippe reports.

The pipeline, which remains conceptual and will take years to permit and build, would connect the gas fields in the north-east of the province with Prince Rupert, where BG has gained access to port land it believes could be suitable for construction of a natural gas export terminal.

The 850-kilometre line would be built with a capacity of 4.2-billion cubic feet per day, or two-thirds the capacity of the TransCanada Corp/ Mainline, the cross-Canada pipeline that carries western gas to eastern markets and has taken more than a half-century to build.

BCE eyes new service
BCE Inc. wants to take on Netflix Inc. with its own made-in-Canada service, but first it needs Canada’s broadcast regulators to approve its $3.4-billion for Astral Media Inc., The Globe and Mail's Steve Ladurantaye reports.

In the first day of a week-long hearing before the Canadian Radio-television Commission, BCE chief executive officer George Cope said today the company would launch a similar service loaded with content from Astral services such as HBO and the Movie Network.

Auto talks troubled
Each of the Detroit Three auto makers is still insisting on drastic changes in contracts with the Canadian Auto Workers union a week before the deadline, the union said today.

While Chrysler Group LLC, Ford Motor Co. and General Motors Co. demand cuts they are refusing to promise any new investments at their Canadian operations, the union said in a bulletin to its members Monday, The Globe and Mail's Greg Keenan reports.

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