Something curious happened earlier today: January spending - which will be part of Q1 GDP - soared, which, as we reported earlier [3], was entirely on the back of a record monthly surge in spending on services, while spending on goods, both durable and non-durable, dropped. The record January spending can be seen on the chart below.
[4]
What happened? Goldman explains.
January nominal personal spending rose 0.4% (vs. consensus +0.1%). Both durable (-0.4%) and nondurable (-0.7%) goods spending fell on the month. Services spending rose a sharp 0.9%, the strongest gain since the bounce-back from the September 11 attacks in October 2001. Out-sized gains occurred in two categories of services spending: household utilities (+9.7%), boosted by colder weather, and health care (+1.6%) in light of enrollments in the Affordable Care Act exchanges.
So there you have it: the first official confirmation that in addition to all its adverse impacts on employment, previously highlighted by everyone with a frontal lobe and even the CBO, in January Obamacare had a dramatic impact on US consumer discretionary impact. As in lowering it.
But far worse was "utilities", namely the "harsh weather", which was the primary reason for the surge in spending on non-discretionary services. Which also means far less spending on stuff one enjoys blowing money on, and far less revenues and profits by those same retailers whose seemingly infinite advertising budgets are what continue to send the social networking bubble to unseen highs.
The good news: since GDP is driven by spending of any kind - be it good or bad - in the first month of the quarter, the "harsh winter weahter" actually had a very positive imapct on GDP, which as a result of the surge in spending, will now have a higher number in the BEA's bean counting models. As will Obamacare, through the magic of Keynesian accounting.
So the next time someone blames the weather for crushing economy in the first quarter, tell them that even Goldman has shown this is a lie. Then again, it is so much more easily comprehensible to the average idiot that the economy is hurt rather than boosted by the weather, that it is probably not even worth the effort.