GDP Surges Due To Increased Health Care Expenditures

December 23, 2014 0 Comments

Out of the blue real gross domestic product, which was originally posted at 3.5 back in October, has managed to grow to 5% in December. This is the largest the economy has grown since 2003, and we all know how terrific those years were, right? This also managed to beat mainstream economist estimates of 4.7%, but that’s alright. When have mainstream economist ever been right about anything regarding… economics?

The drivers behind this growth was the result of revisions to Personal Consumption, originally reported at 2.2% but revised at 3.2%. Also, it originally accounted for 1.22% of the 3.5% number back in October, but not personal consumption accounts for 2.21% of the 5% revised number. Fixed investment was no slouch to this revision, either. Originally, investment contributed 0.74% of GDP not contributed 1.21% of GDP.

The question is, what exactly lead to such a large revision? There are many large contributors to GDP, and all of them are significantly volatile. Between recreational goods, vehicles, financial services, food services, industrial equipment and software, the component with the largest growth in GDP was none other than Health Care expenditures…

As you can see, aside from the growth in structures, health care services consisted majority of the growth in the GDP revision. Two-thirds contribution to be exact. This can either mean one of three things:

  1. The economy is much better off than it was previously because more people are purchasing health care
  2. Health care cost are still rising.
  3. Thanks to the new Obamacare mandate, more consumers are forced to allocate resources into spending money on health care services.

The second and the third point can actually be related, but this isn’t anything new and we can expect health care expenditures to result in much larger portions of GDP for months to come. 

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