How do storms affect the economy?
With a major nor’easter bearing down on New York and New England, a lot of people wonder just how much weather can change the economic outlook. Last winter was a great case-study. As 2013 ended, many looked for economic growth to pick up in the new year. Instead, the combination of record cold temperatures with an especially stormy winter led caused economy to contract at an annual rate of over 2% in the first quarter.
But it came roaring back in in the second and third quarters last year, rising 4.6% and 5%, respectively. It never pays to bet against the American consumer, even when we’re snowed in and shivering. Storms may shut us in temporarily, but they won’t keep us down for long. Consumption delayed is not consumption denied. And of course with so much for sale on-line, we don’t even have to travel to a hardware store to get a snow shovel. Amazon will deliver one.
There can still be some disruption from power outages and travel bans, which makes me wonder why we don’t bury our power lines, like the Nordic countries. They have some experience with nasty weather. In general, though, stormy weather to the economy is like driving in heavy snow: it makes things slide around, but it doesn’t mess up the gears.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!