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Here Is The Reason For The Total Collapse In Q1 GDP

Tyler Durden's picture




 

Remember back in April, when the first GDP estimate was released (a gargantuan by comparison 0.1% hence revised to a depression equivalent -2.9%), we wrote: "If It Wasn't For Obamacare, Q1 GDP Would Be Negative." Well, now that GDP is not only negative, but the worst it has been in five years, we are once again proven right. But not only because GDP was indeed negative, but because the real reason for today's epic collapse in GDP was, you guessed it, Obamacare.

Here is the chart we posted in April, showing the contribution of Obamacare, aka Healthcare Services spending. It was, in a word, an all time high.

 

Turns out this number was based on.... nothing.

Because as the next chart below shows, between the second and final revision of Q1 GDP something dramatic happened: instead of contributing $40 billion to real GDP in Q1, Obamacare magically ended up subtracting $6.4 billion from GDP. This, in turn, resulted in a collapse in Personal Consumption Expenditures as a percentage of GDP to just 0.7%, the lowest since 2009!

Don't worry thought: this is actually great news! Because the brilliant propaganda minds at the Dept of Commerce figured out something banks also realized with the stub "kitchen sink" quarter in November 2008. Namely, since Q1 is a total loss in GDP terms, let's just remove Obamacare spending as a contributor to Q1 GDP and just shove it in Q2.

Stated otherwise, some $40 billion in PCE that was supposed to boost Q1 GDP will now be added to Q2-Q4.

And now, we all await as the US department of truth says, with a straight face, that in Q2 the US GDP "grew" by over 5% (no really: you'll see).

 

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Wed, 06/25/2014 - 09:25 | 4892821 order66
order66's picture

Should be solid fuel for the next leg up in stocks.

Wed, 06/25/2014 - 09:35 | 4892871 Headbanger
Headbanger's picture

See, we need to legalize the "sex worker" industry as part of the mental health care system and GDP goes positve in no time!

Wed, 06/25/2014 - 09:38 | 4892884 SilverIsKing
SilverIsKing's picture

They can't fool me with this mumbo jumbo.

I know the dastardly weather is behind all this.

Wed, 06/25/2014 - 09:42 | 4892893 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

Something like +5% GDP will be a great election time talking point. It will be hilarious though, if the market is in free-fall when they try to pull out that card.

Wed, 06/25/2014 - 09:55 | 4892958 max2205
max2205's picture

Macro data can't kill this monster bull run....invisible hand...job

 

Get over it

Wed, 06/25/2014 - 09:43 | 4892905 Stoploss
Stoploss's picture

Paging: !!! !!!

 

Janet Yellen, please report to the print room.

Janet Yellen !!!!!! please report to the print room .

Wed, 06/25/2014 - 10:07 | 4893021 Chupacabra-322
Chupacabra-322's picture

It's one Huge Fucking Ponzi scheme. There is only the illusion of Free Markets. What we have now is pure unadulterated Fascism.

1. http://www.zerohedge.com/news/2014-01-12/great-buyback-surge-over-corpor...

2. http://www.zerohedge.com/news/2014-06-15/cluster-central-banks-have-secr...

Wed, 06/25/2014 - 20:59 | 4896042 FritoPendejo
FritoPendejo's picture

Another fake-rally is in the offing. 

Wed, 06/25/2014 - 09:26 | 4892825 Charles Wilson
Charles Wilson's picture

War means work for all!

Ask your Representative for moar WAR today!

Wed, 06/25/2014 - 09:26 | 4892828 madbraz
madbraz's picture

this is Robert Rubin/Larry Summers logic/manipulation 101 at its best. 

Wed, 06/25/2014 - 09:28 | 4892831 Winston Churchill
Winston Churchill's picture

Well, if you're going to post a loss, write off everything you can.

Wed, 06/25/2014 - 09:36 | 4892873 pods
pods's picture

That was my thought as well.  Since Q1 was shitty, they will move spending to Q2 to avoid the recession tag.

pods

Wed, 06/25/2014 - 09:45 | 4892908 NoDebt
NoDebt's picture

In agreement with both of you and the Tylers on this one.  They totally kitchen-sinked this quarter, for the dramatic (or maybe not so dramatic) upturn in Q2.

Markets obviously agree- they're going nowhere right now.  And why should they move?  The (increasingly-rare) 100 pt. drop that happened yesterday was everyone who already got told this number in advance lightening up.

Wed, 06/25/2014 - 09:47 | 4892923 fonzannoon
fonzannoon's picture

I will take the other side. Food/energy costs etc and weaker housing are draining discretionary income to the point where they won't even fake a whopper. Maybe they go with 3.5% but that's as high as I see. That will be enough to keep the docile imbecile population in check.

Wed, 06/25/2014 - 09:53 | 4892945 Winston Churchill
Winston Churchill's picture

Anything positive,for Q2, will do at this point Fonz.To avoid the R word at all costs.

Wed, 06/25/2014 - 10:36 | 4893196 BlindMonkey
BlindMonkey's picture

100% agree. There will be ZERO recognition of reality until after November. The Dem/statists will lay the blame at the Rep/statists after the election and bleat about how bad they are. The Dem/statists are looking like they are going to get shelled and a recognized recession will only make it worse.

Wed, 06/25/2014 - 10:40 | 4893221 halfasleep
halfasleep's picture

with all the agreement here on the hedge today (napkin est. 175% increase yoy), i'm thinking it just might be near end time.

Wed, 06/25/2014 - 10:04 | 4892990 NoDebt
NoDebt's picture

At +3.5% Q2 you're the second-highest estimate on the street.  All the 5%-er guys have chickened out and dropped down into the 3s.

Which, of course, probably means it will print at +5%.

EDIT:  Goldman just boosted their Q2 call from +3.8% to +4.0% (they were the one above you, now further above).  Reason cited: pretty much what the Tylers just explained in this article.

 

Wed, 06/25/2014 - 11:44 | 4893539 LostandFound
LostandFound's picture

Let me guess, first quarter contraction, second quarter growth, third quater contraction, fourth quarter growth. Overall GDP negative but not in recession?

Wed, 06/25/2014 - 09:30 | 4892840 GetZeeGold
GetZeeGold's picture

 

 

but because the real reason for today's epic collapse in GDP was, you guessed it, Obamacare.

 

THANK YOU!!!

Do I win something?

Wed, 06/25/2014 - 09:30 | 4892842 101 years and c...
101 years and counting's picture

must lower bar to get Q2 GDP to be up 2%.  and thats how its done.  afterall, if q1 gdp was -1%, q2 would have been 0%.  now, they can put lipstick on the fat hog (the economy, not Yellen).

Wed, 06/25/2014 - 09:33 | 4892855 Seasmoke
Seasmoke's picture

I don't think lipstick will even help this time. That hog is dead, bloated and floating upside down in a river in China. 

 

This is not a recession.  ITS A FUCKING DEPRESSION !!!!!

Wed, 06/25/2014 - 09:41 | 4892898 SilverIsKing
SilverIsKing's picture

Then we should all be buying stawks ahead of the Q2 announcement.

Wed, 06/25/2014 - 09:30 | 4892845 Seasmoke
Seasmoke's picture

Obama don't care. 

Wed, 06/25/2014 - 09:32 | 4892853 GetZeeGold
GetZeeGold's picture

 

 

Most narcissistic sociopaths don't.

Wed, 06/25/2014 - 09:56 | 4892959 Everybodys All ...
Everybodys All American's picture

The collapse of the US economy is being engineered and orchestrated by Obama. This is part of his plan of his transformation. Make no mistake this is not accidental mistakes of a presidential policy gone wrong.

Wed, 06/25/2014 - 10:02 | 4892994 overmedicatedun...
overmedicatedundersexed's picture

you may be right about this is the plan, but then what are the american people going to do about it?? so far what they have done is absolutely nuthin.

Wed, 06/25/2014 - 12:39 | 4893838 Mike in GA
Mike in GA's picture

Barack Obama hate white people. (To use urban vernacular)

 

Wed, 06/25/2014 - 09:31 | 4892846 Agent P
Agent P's picture

Initial estimate probably looked at all the people that signed up for Obamacare, and the revision took into account how many actually paid their premiums. 

Wed, 06/25/2014 - 09:37 | 4892880 pods
pods's picture

It was me, I put Obamacare in my cart but then forgot to check out.

pods

Wed, 06/25/2014 - 10:00 | 4892983 DaveyJones
DaveyJones's picture

that's so unbezos

Wed, 06/25/2014 - 13:17 | 4894068 rosiescenario
rosiescenario's picture

Just my own case, but it is probably like many others'....we were forced off an insurance policy onto one with a deductible 250% higher but which covered things for which we shall never have a need. The premium also is about 20% higher than what was paid before.The major beneficiary has been the insurance company which is still the same one, getting paid more while providing less. Some how I am not surprised as the insurance industry is far better represented in D.C. than my wife or I are.

 

With the far higher deductible we now have less to spend on other things.

Wed, 06/25/2014 - 09:31 | 4892851 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

I knew they were fudging something. That sounds about right. Banana-economics...

Wed, 06/25/2014 - 09:33 | 4892860 DaddyO
DaddyO's picture

The only fudge in DC is being packed...

DaddyO

Wed, 06/25/2014 - 10:38 | 4893208 BlindMonkey
BlindMonkey's picture

Nice base hit on the softball setup. :)

Wed, 06/25/2014 - 09:32 | 4892852 youngman
youngman's picture

Their estimates on Obamacare are all wrong..and will be for a long long time...but they will lie to cover it up....it goes against their dream of Obamacare as a great thing....

Wed, 06/25/2014 - 09:38 | 4892881 DaveyJones
DaveyJones's picture

sort of like their estimates on Iraq

and, come to think of it, it is an invasion  

Wed, 06/25/2014 - 09:32 | 4892854 Spungo
Spungo's picture

I was in the pool! I was in the pool!

Wed, 06/25/2014 - 09:35 | 4892863 DaveyJones
DaveyJones's picture

"Obamacare magically ended up subtracting $6.4 billion from GDP"

magic like witchcraft?

Wed, 06/25/2014 - 09:35 | 4892865 IronShield
IronShield's picture

Relax my Bitchez; the PPT got yo back.  ;-)

Wed, 06/25/2014 - 09:38 | 4892882 overmedicatedun...
overmedicatedundersexed's picture

rubin and obuma on the phone, Obuma" call the norway fund right now, tell them to buy buy buy..

rubin" ah thats not possible they tapped out on EU co's equity"

obuma" then call yeller eer yellin that fat jew and tell her buy buy buy"

rubin " hey she's not that fat"

Wed, 06/25/2014 - 10:42 | 4893229 BlindMonkey
BlindMonkey's picture

Mr Yellen is sensitive about comments of it's weight. Mr Yellen has become angry. Mr Yellen will remove the punch bowl now. No QE for you.

Wed, 06/25/2014 - 09:36 | 4892879 Awakened Sheeple
Awakened Sheeple's picture

And the vix is now down for the day. Well done Mr. Henry.

Wed, 06/25/2014 - 09:40 | 4892896 Racer
Racer's picture

As are all the numbers the US gobmint spit out... all based on nothing

Wed, 06/25/2014 - 09:41 | 4892902 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

they have written off Q1 GDP in order to save Q2 thereby avoiding a quote-unquote recession.

Wed, 06/25/2014 - 09:46 | 4892913 buzzsaw99
buzzsaw99's picture

remember that bullshit number we gave you a few months ago? well, here is the new (revised) bullshit number. [/orwell]

Wed, 06/25/2014 - 10:25 | 4893149 Tapeworm
Tapeworm's picture

Well, there is an election coming up.

Wed, 06/25/2014 - 09:43 | 4892906 buzzsaw99
buzzsaw99's picture

you're not supposed to dig dammit! just read the headline and hit "SELL"!!

Wed, 06/25/2014 - 09:47 | 4892917 hootowl
hootowl's picture

When can we expect Germany to attack the U.S. for heisting its national gold reserves?

Thu, 06/26/2014 - 02:59 | 4896881 cooky puss
cooky puss's picture

Just because Germany is starting to investigate on Merkel's phone tapping doesn't necessarily mean they're growing balls enough to do that. Too bad

Wed, 06/25/2014 - 09:47 | 4892920 LawsofPhysics
LawsofPhysics's picture

Economies that are based on increased consumption in a closed system with finite resources are doomed to fail from the very begining.

 

Prepare for war folks.

Wed, 06/25/2014 - 09:54 | 4892953 GetZeeGold
GetZeeGold's picture

 

 

I'm sure you meant to say MOAR war.

Wed, 06/25/2014 - 09:55 | 4892955 Winston Churchill
Winston Churchill's picture

The shooting season in Ukraine ,and Russia is pretty short.

They better get to work.

Wed, 06/25/2014 - 09:57 | 4892970 DaveyJones
DaveyJones's picture

...because war saves resource, reduces enemies, and gives our youth something to do

Wed, 06/25/2014 - 10:28 | 4893166 slightlyskeptical
slightlyskeptical's picture

"Economies that are based on increased consumption in a closed system with finite resources are doomed to fail from the very begining."

Not really higher consumption they are going for. They want the revenue from goods sold to be higher but they don't want to produce more. Increasing production is expensive and why do it if you can sell less for more.  We have consistently produced less and less but prices have gone up more than production has declined. It all comes out of the poop shoot as "growth".

 

 

Wed, 06/25/2014 - 10:01 | 4892987 Leraconteur
Leraconteur's picture

But not only because GDP was indeed negative, but because the real reason for today's epic collapse in GDP was, you guessed it, Obamacare.

 

That was unexpected.

That escalated quickly.

Total surprise - I mean not ONE person anywhere and certainly no bloggers had one inkling that Obamacare would be a massive drag on the economy. //ss

Wed, 06/25/2014 - 10:11 | 4893043 ThirdCoastSurfer
ThirdCoastSurfer's picture

Time to add taxes to rescue GDP calculations along with prostituion, drugs & movie rentals. 

Wed, 06/25/2014 - 10:12 | 4893058 hardmedicine
hardmedicine's picture

but did i win a prize?  I want my obamaphone and welfare and medicaid and EBT card.  I'm going to get my mexican drivers license and then i will win the prize.  That's what the amigos down at the corner told me. 

 

no seriously. something big is happening.  Healthcare claims for the first quarter on major expenditures fell through the floor and the insurance companies have started denying, whole new set of rules, the INSCO has the answer, double down on payouts and prepare for war.  Just hire a few more lawyers and pay off a few more politicians.  That is their strategy. 

Wed, 06/25/2014 - 10:40 | 4893202 slightlyskeptical
slightlyskeptical's picture

That is because most policies have seen a huge increase in the deductible. If you have a 5k deductible and are broke after paying the premiums, you simply can't afford to go to the doctor and find out something is wrong. The ACA is probably the most offensive action ever taken against the American people.

I am all for a forced participation in a non-profit universal healthcare system. I am totally against being forced into this for profit feeding frenzy.

So we are all paying 50%+ more with larger deductibles to cover increased claims which haven't materialized. Do we all get some money back? Will Obama force the insurers to adjust rates relative to claims? If we had good leaders the answer would be yes.

Wed, 06/25/2014 - 10:53 | 4893280 syntaxterror
syntaxterror's picture

#GrassyKnoll

Wed, 06/25/2014 - 11:38 | 4893507 I Write Code
I Write Code's picture

WTF do these numbers mean anyway - is it the amount consumers pay for a new Obamacare policy?  I have the same individual policy I had before are my monthly premiums "Obamacare" or not?  Or is it only insurance company expenditures for policy holders who got sick?  Or wot?

Of course 90% of Obamacare is on hold until next year, so is that the source of this "revision"?

Wed, 06/25/2014 - 12:05 | 4893671 viator
viator's picture

Obamacare will be a drag on the economy for the foreseeable future as people grapple with significantly higher premiums, deductibles, and co pays.

Wed, 06/25/2014 - 12:04 | 4893673 fiftybagger
fiftybagger's picture

Don't know why this always comforts me, it just does:

...and all liars, shall have their part in the lake which burneth with fire and brimstone: which is the second death.

 

Revelation 21 King James Bible

 

Silver For The People

Wed, 06/25/2014 - 12:55 | 4893939 Chuck Knoblauch
Chuck Knoblauch's picture

We're about to enter an "official" Recession, and at the same time be at DOW 17K?

Interesting!

Who the fuck is buying paper IOU's?

It's not me.

Wed, 06/25/2014 - 13:01 | 4893974 laomei
laomei's picture

I heard a great quote about a new Chinese driver learning to drive and ignoring the mirrors.  

It doesn't matter, it's behind me.

That's the operating mentality now it seems.  The past doesn't matter, only the future.  If the past was bad, it can only mean the future will be even better than expected.  The "past", once marked in decades or even years, is now seemingly marked in days before relevance expires.  

 

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