By Steve Eggleston
If you haven’t noticed, I’ve been missing in action the last few weeks. I’ve just been burned out. One can say the economy is, at best, stagnant only so many times before running out of ways to say it.
Unfortunately for the country, but fortunately for my writing block, the Bureau of Economic Analysis released their third and final read of 4th-quarter GDP. While the BEA found a bit of inflation between the first and third reads to avoid making the deflation indicated in the first read official, they reduced the annualized real GDP growth from 2.6% to 2.2%, which is the same as it was in the second read.
The biggest contributor to that growth is spending on health care (no, not health insurance, health care itself). Annualized spending on health care rose by $39.9 billion in current (not adjusted for inflation) dollars, and $35.3 million in constant 2009 dollars, to, respectively, $2,048.8 billion (current) and $1,836.6 billion (constant 2009). The +0.88 percentage-point contribution to the change in real GDP is the highest on record going back to 1959, and is also the largest positive single-component contributor to GDP change last quarter. It also marks the third consecutive quarter increased spending on health care contributed the largest percentage-point increase to the personal consumption expenditures portion of GDP change.
As for health insurance, there are continuing strong indications that, contrary to the claims made at the time PlaceboCare was passed, spending on health insurance also skyrocketed. There are innumerable reports of skyrocketing premium increases. Further, the larger “financial services and insurance” component of personal consumption expenditures added another +0.17 points to GDP change, after adding +0.35 points in the third quarter. The BEA should issue its estimates of net spending on health insurance in 2014 late this summer, and I’d expect another performance like last year, when it increased by $7.4 billion to $145.1 billion
The report also contains further evidence that much of the job growth over the last year would have been derided as McJobs a decade ago. Increased spending on food services and accomodations contributed +0.30 percentage points to GDP change, the third consecutive quarter it contributed at least +0.21 percentage points. The last time that category contributed more to GDP growth was the 4th quarter of 1999, and the last time the current level of growth has been sustained for at least 3 quarters was the mid-1960s.
Addendum – Tom Blumer blows up the AP meme that the PlaceboCare McEconomy is “durable”.