(Bloomberg) -- Economists raised their estimates for second-quarter economic growth in the U.S. after a Census Bureau report Thursday showed health-care spending rebounded.
Revenue at health-care providers rose 3% from the first quarter, according to quarterly data on service industries that arent adjusted for seasonal swings or price changes. At hospitals, revenue climbed 2.6% in the second quarter from the previous three months, seasonally adjusted.
That probably means economic growth for the period will be revised up to a 4.6% annualized rate, said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn. Gross domestic product expanded at a 4.2% clip in the second quarter, according to an Aug. 28 Commerce Department report.
Health-care spending as percentag of the economy continues to rise, said Stanley, who added that a decline in the first quarter was probably an anomaly. As the effects of President Barack Obamas Affordable Care Act ripple through the health-care system and the population ages, everything points to continued increases.
Thursdays figures, in addition to other data that have become available since the end of August, will be used to revise growth estimates again in the Commerce Departments third estimate of second-quarter GDP, slated for Sept. 26.
The agencys previous Quarterly Services Survey showed that health-care spending fell in the first three months of the year. That prompted the Commerce Department to lower its first-quarter estimate for GDP to a 2.9% pace of decline from a 1% decrease. The final estimate showed the economy shrank 2.1%.
The Commerce Department probably based its initial second- quarter estimates of health-care spending on extrapolations from the prior quarter, which reflected harsh winter weather that kept some Americans from going to the doctor as well as an abnormally mild flu season, said Daniel Silver, an economist at JPMorgan Chase & Co. That resulted in an underestimate of health care spending in the second quarter, he said.
Silver revised up his tracking estimate for second-quarter GDP growth to 4.7% from 4.5%.
With more households able to access health services under the Affordable Care Act, aggregate outlays will probably increase, said John Herrmann, director of U.S. rate strategy at Mitsubishi UFJ Securities USA Inc.
Not as Soft
People are now starting to avail themselves of health care services, said Herrmann, who projects second-quarter growth will be revised up to a 4.6% rate. Going forward, it would be unrealistic to assume that the spending was as soft as was previously presented.
Other figures corroborate the spending pickup in the second quarter. Fifty-four health-care companies in the Standard & Poors 500 Index posted aggregate revenue growth of 12% in the three months ended in June from the year before, according to data compiled by Bloomberg. That compares with a 7.5% increase in sales in the first quarter.
The quarterly services report, which was first released in 2004, is available about 75 days after the end of each quarter, according to the Census Bureau. The sample includes about 5,000 service providers in industries including hospitals, waste management, and administrative and support.
While the report is fairly new and not well known yet, its used to re-estimate about 20% of GDP, particularly health-care services, Jim OSullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., wrote in a Sept. 9 note to clients.
Register or login for access to this item and much more
All Health Data Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access