My informal poll of some of our clients and associates paints a very different business picture than the rosy one on Wall Street. This past Friday the Dow closed at its highest level for 2014 – so far. Yet what I am hearing and feeling is a large veil of caution when it comes to business investment. It’s as if there are many people waiting for the other shoe to drop. While I try to avoid attributing business challenges to external factors, the weather in the U.S. this winter has been miserable. By one reporter’s account $50 billion has been lost due to the harsh winter weather.
That was $50 billion, not $50 million by the way. I’m still very impressed by a number like $50 billion and in all honesty I find it difficult to believe that one season of weather could negatively impact the U.S. economy by that large of an amount.
From the CNBC article:
Severe winter weather this season may have cost the economy as much $50 billion and 76,000 jobs.
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.
Is that a good enough explanation for you to conclude that $50 billion has been lost? And then do you also buy that the economy will ‘snap back’ in Q2 because of ‘pent-up’ demand? I love that expression by the way. When it comes to many businesses there is no such thing as pent-up demand. It’s true that things like buying a car, or having work done on a home or apartment are postponed and not canceled when travel is impossible. Yet retail visits to malls, grocery stores and retail shops, are a mix of discretionary spending as well as necessities. Even more impacted by bad weather is the restaurant business for example, where a lost opportunity is rarely reclaimed.
The bad winter weather has impacted productivity in offices all around the United States. Today, working remotely allows team members to be productive even when people are not in the office. But in no way is it the same as having the team working together and sharing ideas on a people-to-people basis. Productivity is lost plain and simple and it too will not be reclaimed.
With travel and work schedules running amok, many people who remain out of work have found it even more difficult to have those phone calls and interviews. This year, old man winter is clearly not interested in aiding an economic recovery. Since there’s nothing to do but complain I will instead hope that as the winter season heads to a close the words of Mr. Hugh Johnson will ring true:
“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.
I will be sure to look up Mr. Johnson in July.
How has the bad winter weather impacted your business?