Weathering the Economy

Does cold weather hurt the economy?

On the face of it, it sure seems that way. Frigid temperatures keeps 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 “little ice age” of the 16th century may have led to crop failures and increased witch trials.

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

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

Some retailers—like Kohl’s or TJ Maxx—seem especially vulnerable to a big freeze. But sales of snow-shovels and sweaters go up when the temperature goes down. They just don’t make up for the lost spring-wear sales.

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

Douglas R. Tengdin, CFA

Chief Investment Officer

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