For Mark Roberts’ Use: After a particularly difficult winter, we are all enjoying our warm summer weather. But before too long, winter will roll around again. Not to mention, hurricane season is upon us. Even for those of us who live far from areas affected by hurricanes, severe winter storms, or other natural disasters, our economy can still be affected. For example, if you’ve been keeping an eye on the drought situation in California, you may have noticed a difference in prices of products produced in that state.
Last winter, US economic growth fell to 2.2 percent (seasonally adjusted) in the fourth quarter of 2014, and most likely worsened in the first quarter of 2015. Analysts saw disappointing numbers from manufacturing, housing starts, retail sales, and other key economic indicators. In short, people don’t tend to start building houses or go out shopping when they’re stuck at home in due to the cold and snow!
Gross Domestic Product (GDP) numbers are always adjusted to account for seasonal weather, but experts fear that last year’s particularly difficult weather impacted the economy even more than usual. But the ways in which severe weather impact the economy can vary significantly depending upon the industry. For example, construction will likely pick up again once the weather clears, and people will often get out and go shopping after being cooped up in the house for weeks. On the other hand, industries such as airlines and restaurants have lost time, due to canceled flights and reservations, for which they cannot really compensate.
Hopefully, we will enjoy a milder winter this year! But the take-away lessen for all of us is this: During times of severe weather, we can expect for some industries to be impacted more than others. We should also remember that the economic effects of winter weather, or any other natural disaster, can be felt far from the epicenter of the event. This may be something to keep in mind if you are heavily invested in industries which are affected by natural events. Often the economic effects of disasters are short-lived, but some economic effects can be felt throughout the quarter and even into the next.