Snow wallops Valentine's Day: How much is weather harming US economy? (+video)
All that ice and snow drove traffic, flights, and deliveries in some areas to a standstill. But the overall effect of a tough winter on the recovering economy is expected to be more modest, economists predict.
For thousands of US restaurants, Valentine's week became a lot less romantic – financially speaking – as major weather fronts brought waves of snow, sleet, and ice through many of America’s largest metro areas.
That’s just one of many examples of how unusually harsh winter weather is taking a pocketbook toll on America.
The damage goes beyond the financial – with the spate of recent storms leaving 20 people dead and others injured in roadway accidents, according to news reports. But it’s also impeding an economy that, according to official pronouncements, is supposed to be improving.
Other cases in point:
Slower factories and stores. US industrial production fell 0.3 percent in January, according to a government report released Friday, while retail sales for January fell 0.4 percent from the prior month. Economists attribute the sizable month-over-month slowdowns in activity largely to the weather.
Grounded flights. Some 49,000 commercial airline flights were canceled in January alone, about four times the cancellations in January 2013, according to data firm masFlight in Bethesda, Md. That’s a hit not just to airline industry profits, but also to business meetings and tourism. One way to distill the equation: more snow = less Orlando.
Higher heating bills. As households turn up the heat and face higher natural-gas prices, consumers may be hit with about $35 billion in above-trend heating bills this winter, according to estimates this week by economists at the investment firm Morgan Stanley in New York.
Drought's effects. As storms drop icy precipitation in unaccustomed places like Atlanta, the western US has had much lower-than-normal precipitation. The economic effects are uncertain and could add up over time, if the water shortage persists. So far, it means higher prices are more likely for farm-grown produce across the US. Within California, lower revenue for farms and farm-related businesses could total $5 billion this year, by one industry estimate.
Does all this mean the weather is bringing America’s economic recovery to a halt?
No. Economists say these weather-related impacts don’t derail the economy, but they’re still setbacks. The winter weather may put a modest ding in US gross domestic product (GDP), as well as temporarily postponing some activity such as auto purchases.
“Industrial production usually bounces back after a period of bad weather, as postponed orders are completed,” Paul Dales, senior US economist at Capital Economics in London, said in a report analyzing the factory numbers from January. “The fundamentals have not changed. The outlooks for the domestic and global economies are still better than for some time.”
Peter Morici, an economist at the University of Maryland in College Park, Md., predicts that GDP growth in the year’s first quarter will be about a 0.2 or 0.3 percentage point lower, as a result of the weather. Most of that will be made up in the spring, he predicts.
Similarly, the forecasting firm IHS Global Insight predicted Tuesday that abnormal weather may cut the pace of GDP growth by about 0.1 percentage point in the January-to-March quarter.
For reference, as of earlier this month, the firm had been seeing first-quarter GDP growth of 1.9 percent, at an annualized rate.
Forecasters generally expect the pace of growth will pick up after the year’s tepid start.
Some positive signs: Consumer sentiment wasn’t dented in February, despite the weather and some recent volatility in the stock market. The sentiment index held steady for the month, according to data released Friday by Reuters and the University of Michigan.
To some extent, moreover, recent hints of weakness in the economic recovery may reflect flaws in data gathering. A weak tally of job creation by employers during January, for example, rattled stock investors but could be partly an artifact of imperfect efforts by the Labor Department to adjust its numbers for normal seasonal patterns.
If that’s the case, then coming monthly job numbers could pack a bit of positive surprise, as the official numbers catch up with reality.
The legacy of the winter storms, meanwhile, will partly be to shift the time or location of consumer spending, not to cancel it altogether. Some people had to skip a trip to Florida, but spent more on Roofmelt, sleds, or movie rentals.
And, just as schoolchildren will end up with make-up days to catch up with missed classes, lots of US workers will scramble to catch up on projects that were postponed by icy roads.
Mr. Morici at the University of Maryland says some consumers who are delaying car purchases will end up actually spending more when they do get to a dealership, because the storms remind them to look for snow-worthy vehicles.
Something similar may happen around the house, too. “Some property owners will undertake improvements to better fortify against cold weather and ice they had previously not considered,” Morici writes.
And those Valentine flowers delayed by snow? If you ordered them online, they may be bought and paid for, whether they arrive on time or not.