Think winter socked US economy? Try Estonia.

Estonia finally saw industrial production rise, but only because cold weather boosted power production. That's not growth to count on.

By , Guest blogger

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    Cold weather in Tallinn and elsewhere boosted Estonia's economy in the short term by forcing more power production. But long term, snow and cold are a drag on growth.
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I have previously discussed how the weather factor, in the form of cold and snow up here in the northern part of the northern hemisphere is negatively affecting the economies up here.

There are however sectors which will benefit from this weather. One is of course the snow removal businesses. They have been a lot more busy than usual something which will also of course increase their incomes.

Another sector is the utilities (power plants). This was illustrated in today's industrial production report from Estonia. For the first time since the beginning of the financial crisis, Estonia saw an increase (though only very marginal at 0.3%), reflecting primarily base effects as the big declines in late 2008 are removed from the 12 month comparison, but also an increase in output compared to previous months. However, manufacturing still posted a 2.8% annual decline and mining rose only 0.6%. By contrast, power production surged 24.5%. The reason why power production increased so much is that the unusually cold weather in Estonia increases the demand for heating.

Because of the boost to the snow removal and power production businesses, the negative net effect on GDP will be limited. However, since snow removal and heating really aren't good things in themselves (they merely mean that the greater evils of snow on the roads and cold are averted), this limiting effect from this is arguably an illusion, and official statistics will therefore underestimate the economic welfare loss from snow and cold.

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