Is the weather affecting the Economy?

by Laura Ehrenberg-Chesler on February 14, 2014

in Economic Indicators,Employment,retail sales

This morning on CNBC there was an interesting debate about how much, if at all, the severe winter weather is exacerbating the recent weakness in the economy.

“A CNBC Fed Survey of 19 Wall Street economists, strategists and fund managers puts the total weather impact at about a third of a percentage point on the $16 trillion US economy, or roughly $50 billion. The big hit to the economy comes this quarter, where survey respondents estimated that bone-chilling cold and driving snow shaved about four-tenths of a point off total growth, including lost work hours and lost sales. That’s on top of a loss in the December quarter of 0.16 percent. But there is also an expected snap back next quarter

of about 0.23 percent in part because of pent up demand — houses that still need to be built and cars that Americans had hoped to buy. Add it all up and the net is about 0.3 percent.

“It seems reasonable to conclude that the weather is impacting growth and equally reasonable to anticipate that it will be offset in Q2,” said financial advisor Hugh Johnson. A big decline in January retail sales looked to have been affected at least in part by weather with plunging auto, furniture and department sales. A big increase in building and garden supplies may have resulted from Americans buying shovels, salt and snow blowers. The weather also appears to be hurting the jobs market. Respondents estimated that December, January and February payrolls were about 80,000 jobs lighter because of the weather, including a 32,000 hit to jobs in December, 25,000 in January and 19,000 in February.” In early April when we see the first quarter GDP, we will be able to determine the real effects of the weather on the consumer and jobs. Until then, it is purely speculation. However we are convinced that the frigid temperatures and snow has had a larger impact on the recent slowdown than is currently being acknowledged.

 

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