Two month ago, when the BEA released its first estimate of the hurricane-impacted economy during the third quarter (which came in at a stronger than expected 3.0%) we were surprised to report that according to the Department of Commerce, in the third quarter the biggest driver of marginal spending was car sales (technically Motor Vehicles and Parts), which increased by $15.
6 billion to $463.5 billion. Which, as we said at the time and considering recent US and global automakers data, was paradoxical in light of the ongoing decline in overall auto sales in the second half of 2017, and it was far too early to expect the post-hurricane spending spree. It was also surprising because as Americans splurged on cars, they pulled back on gasoline purchases, which was the single biggest detractor to spending, subtracting a marginal $3.5 billion in PCE, to $283.6 billion.
In any case, we concluded by saying that "we now await for the revisions to this initial estimate over the coming two months, because something tells us that the auto spending spree will be thoroughly revised well lower."
Well, two months later, with the BEA releasing its final Q3 GDP estimate this morning, it appears we were right: the contribution from motor vehicles was indeed revised lower, if not nearly as dramatically as we expected, from a marginal increase of $15.6 million to $13.1 million.
And yet, most other line items also saw a downward revision, which means that something had to increase sharply to compensate for the downward revisions among other spending components. Sure enough, something did: the old faithful "plug" which has saved the US economy every quarter for the past 4 years: Healthcare, or as it is better known, Obamacare, because with Trump failing to repeal Obama's signature health law, and even the recent Tax Cut putting Obamacare in limbo it means that Healthcare will merrily "contribute to GDP" for years to come, by being the single biggest marginal spending item for the foreseeable future.
To wit: from an initial marginal contribution to Q3 GDP growth of only $7.6 billion in the first estimate, the final revision has "healthcare" providing an incremental $22.1 billion in economic growth, reaching a new all time high of $2.016.8 trillion in chained-dollars. Of note: the GDP contribution from Healthcare, at $2.017 trillion is about to surpass the historically biggest contributor to US GDP growth, housing, which was "only" $2.046 trillion chained dollars in the third quarter. At the current rate of convergence, healthcare will housing it in 2-3 quarters.
Finally, for a comparison of how dramatically the contribution of "Healthcare" was revised higher, here is a chart showing side by side the change in spending among all key line items, between the first and third GDP estimates. One can almost hear the orders "from above" to make GDP 3% or higher at any cost when looking at this chart.
