Economic growth slowed to a crawl in the first three months of the year. Without an Obamacare-driven boost to health care spending, it would have stalled out completely.
U.S. gross domestic product, the broadest measure of goods and services produced by the economy, grew at an annual rate of 0.1 percent in the first quarter, the Bureau of Economic Analysis said Wednesday. That’s down from a 2.6 percent rate at the end of last year and represents the slowest growth since the end of 2012.
A key note of caution: Preliminary GDP estimates are notoriously unreliable. On average, the figures get revised by half a percentage point between the first and second estimate (which we’ll get next month) and by a whopping 1.3 percentage points when the final numbers come in.
Still, these are the best numbers we have, and they aren’t pretty. Business investment fell. Construction spending (technically, “residential fixed investment”) fell. Government spending fell. Exports fell. Imports fell, too, which is technically good for GDP (imports are a negative in GDP calculations) but suggest weak consumer demand.
About the only thing that was up was consumer spending, which grew at a healthy rate of 3 percent. But there’s less there than meets the eye. Spending on goods was nearly flat, as was spending on most categories of services. Just two spending categories drove the growth: utilities, due to the cold winter, and health care, due to the rollout of the Affordable Care Act. Millions of people have signed up for health coverage under the new law, and while many already had insurance, the enrollments have clearly given the economy many new health care consumers.
The growth in health care spending wasn’t a surprise. I wrote about it in March when the government released monthly spending data. Still, the magnitude is impressive: Health spending jumped by $43.3 billion. The economy as a whole grew by just $4.3 billion.
That kind of growth isn’t likely to continue for long. Now that the initial sign-up deadline has passed, enrollments will presumably slow. That doesn’t mean spending will fall; it just won’t keep growing at its recent rate.
The good news for the economy is that other areas should pick up the slack. Federal Reserve Chairwoman Janet Yellen, among other prominent economists, has blamed unusually harsh winter weather for slowing the economy early in the year. If they’re right, we should see better growth in the months ahead.