Does cold weather hurt the economy?

Icicles on a tree. Source: Wikipedia

On the face of it, it sure seems that way. Frigid temperatures keep people home and depress retail sales. They hurt agricultural output and can lead to injuries or even death from accidents and physical stress. There’s even some thought that the 16th century’s “little ice age” may have led to crop failures and witch trials.

Certainly extreme weather interrupts us. It’s hard to go shopping or plant crops when you have to shovel out. And storms, droughts, and cold-snaps affect short-term commodity prices. But the effect is local. Three inches of snow in Minneapolis is no big deal; in Washington, DC it’s enough to shut down the government.

But our economy has adapted to deal with minor disruptions. Telecommuting makes it possible for people to still work when they can’t drive to the office; insurance helps us put our lives back together after a big storm. There are also some surprising health benefits from cold weather, like reducing inflammation and killing off parasite-carrying mosquitoes.

Fashion retailers—like H&M or TJ Maxx—seem especially vulnerable to a big freeze. But sales of fleece pullovers and sweaters go up when the temperature goes down. They just don’t make up for lost spring-wear sales.

It’s disruption—not cold—that’s the real challenge. But the more diverse an economy is, the better we can all adapt.

Douglas R. Tengdin, CFA

Chief Investment Officer

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