June 18, 2014

Well, We’re Not Imagining the Deterioration: AP Reports an Estimated Annualized 2% First-Quarter Contraction (Potentially MUCH Worse; See Updates)

Filed under: Economy,Taxes & Government — Tom @ 12:28 pm

From today’s coverage of the government’s “current account” trade report at the Associated Press:

A larger trade gap in the first three months of this year cut nearly a full percentage point from growth. Economists now estimate the economy contracted at an annual pace of 2 percent in the first quarter. But they expect growth will resume in the current quarter at roughly a 3.5 percent rate.

Wow.

I thought AP would sit on the worsening GDP situation until about 12 hours before next Wednesday’s final revision from the government. Perhaps it just got too ugly to ignore.

From what reporter Christopher Rugaber has written, trade alone is on track to worsen the 1st quarter contraction to an annualized 2 percent, because the “full percentage point” (actually 0.95 points) to which he referred is already baked into the GDP report. So, if I’m interpreting correctly, today’s even worse trade news alone is what took the estimated 1Q contraction to 2 percent.

But what about the health care spending adjustment? On Friday at this post, based on a Reuters report carried at CNBC and before the trade news noted above, I presented the following chart:

PotentialFinalRevTo1Q14GDP

If health care spending causes yet another separate downward revision to GDP, we’re now looking at a conceivable annualized contraction of 3.9 percent (1.0 currently reported plus 1.0 due to trade plus the net change of 1.9 due to health care).

There’s actually a wide possible range in the health care spending shrinking of 2 percent; it could be anywhere for -1.2 percent to -2.8 percent. Run the worst-case shrink through the above analysis, combine it with everything else, and you’ve got a potential annualized contraction of over 4 percent. O … M … G.

Even if a 4 percent annualized contraction is “out there” (to be clear, I’m having a hard time convincing myself that it is, but that’s because it’s so bad that it’s just hard to absorb), it seems almost certain that we’re looking at an annualized contraction of quite a bit more than 2 percent.

_______________________________________

UPDATE: Maybe the economists and analysts out there should just pull a CBO-Obamacare maneuver and say, “Based on Obamacare, we have no flippin’ idea where the economy is going.”

UPDATE 2: I have it on good authority that the AP’s -2 percent is supposed to be all-inclusive. I’m thinking it’s “not-enough inclusive,” but we’ll see in a week.

Share

3 Comments

  1. [...] Obamacare. The Affordable Care Act’s hopelessly incompetent rollout, ongoing management nightmares and constantly changing arbitrary rules appear to have been concocted to impose utter chaos on the health care system and ultimately to bring about a single-payer, i.e., government-run, system. If that’s really so, early returns indicate that it’s working, as the statist regime’s drag on the economy — and not this winter’s miserable weather — was a primary cause of the economy’s recently estimated 2 percent annualized first-quarter contraction. [...]

    Pingback by Cloward-Piven Everywhere | Conservative Angle — June 24, 2014 @ 12:15 pm

  2. [...] Obamacare. The Affordable Care Act’s hopelessly incompetent rollout, ongoing management nightmares and constantly changing arbitrary rules appear to have been concocted to impose utter chaos on the health care system and ultimately to bring about a single-payer, i.e., government-run, system. If that’s really so, early returns indicate that it’s working, as the statist regime’s drag on the economy — and not this winter’s miserable weather — was a primary cause of the economy’s recently estimated 2 percent annualized first-quarter contraction. [...]

    Pingback by Cloward-Piven Everywhere | therightplanet.com — June 24, 2014 @ 3:00 pm

  3. [...] AP pair also ignored the deteriorating trade situation, which is the other principal reason why tomorrow’s reported contraction is predicted to be [...]

    Pingback by BizzyBlog — June 24, 2014 @ 4:18 pm

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.