Excluding Obamacare, US Economy Contracted By 2% In The First Quarter

Tyler Durden's picture

As if the official news that the US economy is just one quarter away from an official recession (and with just one month left in the second quarter that inventory restocking better be progressing at an epic pace) but don't worry - supposedly harsh weather somehow managed to wipe out $100 billion in economic growth from the initial forecast for Q1 GDP - here is some even worse news: if one excludes the artificial stimulus to the US economy generated from the Obamacare Q1 taxpayer-subsidized scramble, which resulted in a record surge in Healthcare services spending of $40 billion in the quarter, Q1 GDP would have contracted not by 1% but by 2%!

The history of healthcare spending's contribution to GDP. The outlier needs no highlighting:

And here is the breakdown of overall Q1 GDP and just the contribution from healthcare. In other words as the "favorable boost" to the economy from this most epic instance of capital misallocation fades, expect the drag to GDP to be even more acute, and will almost certainly offset the benefits of "unharsh weather."

Source: Dept of Commerce