GDP took a nosedive in Q1, but there was some good news

Revised numbers show a drop in GDP. This was not good news, worst showing in 5 years.

U.S. gross domestic product contracted at 2.9 percent in 1st quarter, worst showing in five years

But, it’s not quite as simple as it seems. There was some good news buried in the numbers:

Good News on Health-Care Spending Is Making U.S. GDP Look Bad

Here’s the meat of it:

The big surprise in the first quarter was the dip in health-care spending. The U.S. spent $6.4 billion less on health care in the first quarter than in the last quarter of 2013. Government statisticians initially forecast a 9.9 percent increase in health-care spending—and what we got was a 1.4 percent decline. Considering all the millions of previously uninsured people who are gaining access to health insurance under the Affordable Care Act, how can they be shrinking so dramatically?

Health-care costs overall have been increasing more slowly in recent years compared with the pace before the 2007-09 recession. Slow growth in the price of health-care services combined with a decline in utilization—the amount of health care people consumed—in the first quarter. So lower costs and greater access translated into lower consumption. That’s a head-scratcher.





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