US 1Q GDP Growth Would Have Been Negative (-1%) Without Obamacare Spending and Heating

If you listen to NPR, you wouldn't know that.

And never mind that Obamacare simply "takes money out of one person’s pocket and transfers it to another person’s, potentially crimping the spending of the person or company bearing the higher cost burden".

And never mind that it's very hard to find doctors who do take Obamacare insurance...

From Wall Street Journal (4/30/2014; emphasis is mine):

Health Care, Heating Prevent First-Quarter Contraction in U.S. GDP

The U.S. economy might have shrunk in the first quarter if not for the Affordable Care Act and spending to keep out the cold.

U.S. gross domestic product expanded a paltry 0.1% in the first three months of the year, dragged down by falling inventories and weaker exports. Spending on housing and utilities, meanwhile, contributed 0.73 percentage point to the change in GDP while spending on health care added a hefty 1.1 percentage points, the highest figure on record.

“If health-care spending had been unchanged, the headline GDP growth number would have been -1.0%,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Outlays on utilities are clearly a double-edged sword. First, the severe winter weather chilled activity in other areas of the economy. Second, households have limited budgets and might well have spent money buying other goods or services had they not been forced to boost their thermostats.

“Looking ahead, we expect consumption growth to remain stronger than in 2013, but we expect the contribution from goods consumption to rise and the temporary support from utilities and health care to gradually wane,” said Michael Gapen, an economist at Barclays Capital.

The strong increase in health-care spending reflects that Americans — some of whom are newly insured — are visiting doctors and purchasing more medical products, said Jason Furman, chairman of the White House’s Council of Economic Advisers.

Prices for health-care services rose more slowly than overall inflation in the first quarter, compared to a year earlier. That indicates utilization — not price gains — is driving the increased spending, he said.

“People who didn’t have insurance before can now go to the hospital and the doctor,” Mr. Furman said in an interview. “That’s good for the economy.”

The spending figure includes amounts spent on purchasing insurance as well as drugs, exams and other care.

The Affordable Care Act required most Americans to carry health coverage, expanded eligibility for Medicaid and created new health-insurance exchanges offering subsidized policies for many. Enrollment for private health insurance through federal and state exchanges has swelled to about 8 million, the White House said.

So far this year, that has increased incomes and encouraged more spending on health-care services. (The Commerce Department cautions that its figures may be heavily revised. Its latest estimate is based on Medicaid benefits and ACA insurance exchange enrollments; more complete information is expected before the final first-quarter GDP release on June 25.)

Clearly, though, the vast pool of Americans with new access to health care have been visiting doctors and hospitals in rising numbers. “That pent-up/hidden demand for healthcare was huge,” Mr. Shepherdson said. “Next question: How long will it last?”

The White House’s Mr. Furman said the Affordable Care Act should provide a “tailwind” to the economy for “the next year or two,” as more Americans gain health coverage.

The deadline to enroll in exchanges was March 31. Though it’s been extended for individuals who had trouble completing applications, some economists say the economic impact of the health-care law may well fade—at least until the next enrollment period.

The law could have negative consequences as well. The Congressional Budget Office said in February the law would reduce the total number of hours Americans work by the equivalent of 2.3 million full-time jobs in 2021.

Another factor to consider: The Affordable Care Act, like all government spending, is funded either via taxes or borrowing. So it takes money out of one person’s pocket and transfers it to another person’s, potentially crimping the spending of the person or company bearing the higher cost burden.

Finally, one main goal of the law is to help contain health-care costs over the long term, allowing more resources to flow to other sectors of the economy. Much more data — and time — is needed to see if it’s successful on that front.

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Japan's GDP Drops 1.1%, and Nikkei Goes Up

because the drop was less than the forecast (which was between -2.0 to -2.4%). Nothing can drop the stock markets of the so-called developed countries any more. BRIC, without the exception of R, have been dropping while Dow, Nikkei, Dax, CAC, FTSE continue to levitate.

From MarketWatch:

LOS ANGELES (MarketWatch) -- Japan's gross domestic product fell 1.1% in October-December on an annualized basis, the Cabinet Office reported Monday, beating forecasts but also marking the first economic contraction since July-September 2009, when the economy shrank by 1.2%. The GDP was expected to fall by 2.4% for the quarter, according to a Dow Jones Newswires survey of economists, and was tipped to drop 2.0% by separate surveys from Bloomberg News and FactSet. On a quarter-on-quarter basis, GDP lost 0.3%, after growing 0.8% in the previous three months.

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GDP Grows 14.7% in 2010 ..... in Singapore

I was looking for a cheerful bit of news outside CNBC and Goldman Sachs (who recently switched to cheerleading with their bright outlook on the US economy), and I found one. It's just not about the US economy, but cheerful nonetheless...

Singapore's 2010 GDP jumped 14.7%.

AFP via Breitbart:

Singapore's economy expanded at a record 14.7 percent in 2010, Prime Minister Lee Hsien Loong said Friday, in a sharp recovery from last year's recession for the city-state.

It was the best performance ever for Singapore's trade-led economy, surpassing the previous record 13.8 percent growth achieved in 1970.

The annual 14.7 percent surge announced by Lee is also at the top end of the government's growth forecast of 13-15 percent.

For next year, growth will moderate to 4.0-6.0 percent, Lee said.

"The Singapore economy recovered strongly in 2010," the prime minister said in his annual New Year speech.

"This is a dramatic rebound from the negative growth last year.

"We should rejoice in this exceptional performance, but please remember that it is also the result of special circumstances, and so is unlikely to be repeated soon."

Singapore's gross domestic product (GDP) shrank 1.3 percent last year because of the global downturn when demand from the US and other developed economies collapsed.

Its GDP, valued at 247.33 billion Singapore dollars (191 billion US) in 2009, is highly dependent on external trade and any slip-up in the global economy will affect the city-state's economy.

A sharp recovery after a sharp decline. It seems to me that the city state's economy is much freer than what we have here in the US.

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Consumers Are Saving More Than Spending

And that's supposedly sending the stock market lower today.

Stock market slides as savings rate jumps
(6/26/09 AP via Yahoo Finance)

"Stocks were mostly lower Friday after the Commerce Department reported that personal spending, incomes and savings all rose in May. What troubled investors, though, was that the savings rate soared to 6.9 percent, a 15-year high, while spending rose by a modest 0.3 percent.

According to the announcement released today by Bureau of Economic Analysis (Commerce Department),

• Personal income increased $167.1 billion, or 1.4 % in May, compared with April's 0.7%
• Personal consumption expenditures (PCE) increased $25.1 billion, or 0.3 %, from April's 0%
• Personal saving as a percentage of disposable personal income was 6.9%, compared with 5.6 % in April

However, the same announcement also says about wages and salaries:

"Private wage and salary disbursements decreased $12.4 billion in May, compared with a decrease of $0.7 billion in April. Goods-producing industries' payrolls decreased $12.9 billion, compared with a decrease of $12.2 billion; manufacturing payrolls decreased $9.8 billion, compared with a decrease of $4.9 billion. Services-producing industries' payrolls increased $0.5 billion, compared with an increase of $11.5 billion. Government wage and salary disbursements increased $3.9 billion, compared with an increase of $5.7 billion. "

The AP article continues:

"The trend suggests consumers are being extremely careful with their money. That's good for the individual, but not great for the overall economy in the short-term."

Why not? Because 72% of the U.S. GDP depends on consumer spending. Let's take a look again at the 2009 1st quarter GDP announced on Thursday:

Let's check what's under "Personal Consumption Expenditures" to figure out what economists, analysts, traders, investors, government officials, everyone else but the "consumers" want "consumers" to spend. Bold typed items are major ones.

• Motor vehicles and parts
• Furniture and household equipment
• Food
• Clothing and shoes
• Gasoline, fuel oil and other energy goods
• Housing service (whatever it is)
• Electricity and gas
• Transportation service
• Medical care
• Recreation
• Other services

Where can the consumer be induced to spend more, when economic uncertainty hangs over his head? Deep discounts and fire sales at GM/Chrysler dealerships must have helped the motor vehicle sales a little. But other than essentials (food, gas, electricity), do consumers want to spend just because there are bargain sales?

Private businesses, large and small, are still cutting back, trying to purge the excess from the system. Consumers, many of whom happen to be business owners themselves, are doing the same. Shouldn't the government? Why does GDP need to rise all the time?

In the meantime, consumer sentiment rose unexpectedly to 70.8 in June, according to University of Michigan survey. It's the highest since February 2008.

The conventional wisdom is "If consumers feel good about things, they will spend more." There's another possibility, from my anecdotal observation: People feel better by saving more and/or reducing the debt.

One thing I can think of that will almost force consumers to spend like there's no tomorrow: massive inflation. A threat of such an event is probably enough to get them to start exchanging fiat currency into real assets - anything from toilet paper rolls to real estate.

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Government Debt Burden Is Half A Million Per Household

Never mind that 1Q GDP (-5.7% annualized) was "less bad" than the last month's first estimate (it was actually worse than the second consensus by the economists). The US household is straddled with so much debt that makes you wonder how we can even afford a government.

In the article titled: "Leap in U.S. debt hits taxpayers with 12% more red ink", USA Today tells us that: [emphasis by me]

"Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

"The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

"That's the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003.

"The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined. "

Of household liabilities, the personal debt average is $121,953, according to USA Today. On top of that comes the government debt of $546,668, which includes ALL government liabilities - Treasury bonds, Medicare (52% of the government debt), Social Security, military pensions, civil servant retirement, and others.

Total: Each household owes $668,621. There are 111 million households in the US. Total national debt computes to $74 trillion, of which the government debt is over $60 trillion.

The article, however, may be underestimating the Medicare obligation. This analysis in 2005 for Senate Budget Committee shows the Medicare total obligation ALONE at $61 trillion.

The government portion of the debt is guaranteed to increase (already declared by the administration) this year, next year, and year after, with new programs and packages coming online. Red ink as far as eyes can see. No wonder the government doesn't do GAAP accounting.

The US GDP is $14 trillion.

The stock market is slightly down despite the "less bad" GDP number. At 11:54 am EST, Dow is down 22 points to 8,381, Nasdaq down 5 points to 1,746, S&P500 down a fraction to 906 (commodity stocks are very strong). US dollar Index is below 80 (long-term support). Gold spot price is $978, up $19. Crude oil is $66.26, up $1.18.

The market is also on a death watch of one of the America's iconic companies (GM).

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