Here Is The Reason For The Total Collapse In Q1 GDP

Zero Hedge ^ | 06/25/2014 | Tyler Durden

[SeekAndFind]

Remember back in April, when the first GDP estimate was released (a gargantuan by comparison 0.1% hence revised to a depression equivalent -2.9%), we wrote: "If It Wasn't For Obamacare, Q1 GDP Would Be Negative." Well, now that GDP is not only negative, but the worst it has been in five years, we are once again proven right. But not only because GDP was indeed negative, but because the real reason for today's epic collapse in GDP was, you guessed it, Obamacare.

Here is the chart we posted in April, showing the contribution of Obamacare, aka Healthcare Services spending. It was, in a word, an all time high.

 

Turns out this number was based on.... nothing.

Because as the next chart below shows, between the second and final revision of Q1 GDP something dramatic happened: instead of contributing $40 billion to real GDP in Q1, Obamacare magically ended up subtracting $6.4 billion from GDP. This, in turn, resulted in a collapse in Personal Consumption Expenditures as a percentage of GDP to just 0.7%, the lowest since 2009!

Don't worry thought: this is actually great news! Because the brilliant propaganda minds at the Dept of Commerce figured out something banks also realized with the stub "kitchen sink" quarter in November 2008. Namely, since Q1 is a total loss in GDP terms, let's just remove Obamacare spending as a contributor to Q1 GDP and just shove it in Q2.

Stated otherwise, some $40 billion in PCE that was supposed to boost Q1 GDP will now be added to Q2-Q4.

And now, we all await as the US department of truth says, with a straight face, that in Q2 the US GDP "grew" by over 5% (no really: you'll see).

[Viennacon]

Let me state the reason in unequivocal terms

The Uniparty

[Oldeconomybuyer]

bookmark

[zzwhale]

We the People aren’t buying the OBAMABULLSHIT......not a smidgen of it....period

[Cringing Negativism Network]

You are so right.

Both parties have exported a huge segment of what used to be American manufacturing, to China.

(and other countries, but China is the big issue right now)

We import approximately 440 billion dollars worth of stuff now from China.

We only export approximately 122 billion dollars worth of stuff back to China.

BOTH PARTIES are sold out.

Bring back American jobs.

Stand up GOP.

Stand up.

[Viennacon]

Exactly

[relictele]

It’s a capital strike, plain and simple.

They knew the day Obama took office that he would look for a single hair raised above the parapet so he could target them for a shakedown a la Microsoft.

And since once-proud capitalist outfits like GM and Chrysler became shameful boot-licking wards of the state there are fewer fat ripe targets out there.

[chuckles]

ping for later

[SeekAndFind]

RE: It’s a capital strike, plain and simple.

If that is the case, then I see no reason why the same reason that caused the GDP to collapse in Q1, won’t apply to Q2.

I mean, what good reason is there to believe that the capital strike in Q1 suddenly will be over in Q2 and for the rest of the year?

[GOPJ]

Obama’s a democrat. Democrats are filthy liars and cheats...

[relictele]

All right, plain and simple it’s not.

But I just think there are many cumulative effects of volitional withdrawal of investment based on fear of political persecution.

[Viennacon]

The GOP is too busy pandering to cronies at the CoC to ever think about bringing back American jobs, which is why bluecollars continue to vote Democrat

[MrB]

Those committing this “capital strike” are just doing it because they can’t stand a black president...

isn’t that what the left would say?

[Article10]

Time to repeal the 17th amendment...

[Organic Panic]

Uh. Sequester, uh polar vortex, uh Bush’s fault, uh republicans....

[Myrddin]

Sequestration ate my lunch last year. My customer had no money to pay for my services from May through September. I survived by burning off 500 hours of vacation accrued over the last 20 years. The customer came back with some money that has kept a skeleton crew running since Oct 2013, but that won't last as full time work through Sept 2014. Sequestration looms again in 2015 and the new contract structure uses IDIQ (indefinite delivery, indefinite quantity) where "winning" a contract simply meets you have less competition as you bid over and over for crumbs to be paid from your "winning" contract. The IDIQ process is subject to delays in funding that have my co-workers leaving at a pretty consistent rate.

The DoD contracting business is simply getting too unstable as a career. I need to move to something with more reliable funding strategies. The old phrase, "money talks, bullshit walks" applies. The DoD customers want services from people with very specialized skill sets, but treat them like crap by repeated lapses in funding. I can't backstop that bad behavior again. My vacation cushion was expended last year.