The first report was that the U.S. economy was essentially and unexpectedly flat in Q1, but then was unexpectedly revised downward to a 1.0% contraction. The final figure is now in, and it looks (quite unexpectedly) like the economy shrank at the annualized rapid rate of 2.9% last quarter. What’s to blame? The weather — and then some:
While the economy’s woes have been largely blamed on an unusually cold winter, the magnitude of the revisions suggest other factors at play beyond the weather. Growth has now been revised down by a total of 3.0 percentage points since the government’s first estimate was published in April, which had the economy expanding at a 0.1 percent rate.
The latest revisions reflect a weaker pace of healthcare spending than previously assumed, which caused a downgrading of the consumer spending estimate. Trade was also a bigger drag on the economy than previously thought. The economy grew at a 2.6 percent pace in the final three months of 2013. With the first quarter in the rear view and the April-June period looking stronger, investors are likely to ignore the report.
The drop in exports might also have something to do with a weaker global economy, which points to the folly of relying on exports for growth — a strategy relied upon by every administration since Bill Clinton’s. A country which can’t grow on the strength of its domestic economy, which must instead depend on debt, easy money, and the kindness of foreigners, is a disaster waiting to happen.
That point about healthcare spending stands in sharp contrast to the administration’s previous insistence that increased spending under ♡bamaCare!!! had saved us from a contraction in Q1. That claim reveals the lie that ♡bamaCare!!! was supposed to save us money. Instead, the White House was depending on increased costs to you and me, right from the get-go. That makes me wonder if perhaps they were counting on us spending more on healthcare to more than make up for ♡bamaCare!!!’s costs to the rest of the economy — like cutting the end off a piece of string, knotting it to the other end, and expecting the string to become longer. In reality of course, the knot (in this case representing ♡bamaCare!!!) makes the string effectively shorter. I expect that folks with ♡bamaCare!!!-compliant coverage might be spending less in the short term, due to their higher copays and deductibles. That will work right up until they actually get sick, which is not something anyone wanting to remain solvent ought to do under the ACA.
Also note that in this age of global warming, we experienced a winter so cold and snowy that it prevented us from spending more on the law that was going to save us money. On a side note, never confront a Democrat with all these facts at once, or their head might explode. My head is merely pre-hurting from the hangover I plan on having tomorrow morning.
But there is a silver lining to be found, if you’re willing to squint really hard to see it:
Data such as employment, manufacturing and services sectors point to a sharp acceleration in growth early in the second quarter. However, the pace of expansion could fall short of expectations, which range as high as a 3.6 percent rate. Economists estimate severe weather could have slashed as much as 1.5 percentage points from GDP growth in the first quarter. The government, however, gave no details on the impact of the weather.
Real employment has barely budged this year, durable goods orders contracted in May, consumer spending contracted in April and was flat in May. If we’re going to get robust — that’s better than 3.0% — growth this quarter, it’s pretty much all going to have to happen in June. And I almost hesitate to mention that June is nearly over. Have the previous 25 days felt robust-y to you?
If we are very, very lucky, we might just eke out enough growth in Q2 to cancel out the contraction of Q2. But after disappointing numbers in April and May, it looks like our luck might be running out, and that the first half of 2014 won’t even be a wash.
But rather than leave you on that sad last note, I’ll leave you on an even sadder one.
Bad economies typically come roaring back just as quickly as they sank into the pits of the recession — recoveries, in other words, are typically V-shaped. What we got instead under Obamanomics was “the new normal” of tepid growth, tepid job creation, and massive debt and money-printing. With that recent history in mind, what made anyone think Q2 would come roaring back after our craptaculent Q1?