It’s been cold this week. So cold, in fact, that the polar vortex that subjected many parts of the United States to record low temperatures could have an impact beyond prompting you to reach for an extra pair of socks.
Cold weather (along with irregular weather of any kind) can have measurable economic implications. The recent, widespread run of South-pole like conditions forced millions of Americans to forego trips to spend money at the movies, restaurants, and grocery stores. Some 6,000 flights were canceled Monday and Tuesday, and thousands more were delayed. Furthermore, commute conditions that ranged from unpleasant to downright dangerous compelled many workers to stay at home, which hampers productivity. All told, the US economy could lose up to $5 billion from the cold snap, according to Planalytics, a research firm based in Berwyn, Pa., and London that tracks weather’s impact on various industries.
So, should worry about the cold extend past frozen pipes and numb fingers? Not much, because most of the financial loss is just a matter of timing, says David Berson, chief US economist at Nationwide Financial, a financial advisory service of Nationwide Mutual Insurance in Columbus, Ohio. “Yes, people put off some spending, but it’s spending that they will resume later on,” he notes. “People aren’t going out to see that movie they planned on seeing, or they’re reaching for that jar of peanut butter in the back of the pantry instead of going to the grocery store. But they’ll have to get groceries eventually, and that movie will probably still be in theaters. If you needed to buy underwear but you couldn’t get to JCPenney’s this week, you probably still need to buy underwear.”
“Of course, there will be some [permanent] loss,” he adds. “Maybe a shipment of milk goes bad because not enough people go to the supermarket. There will be perishable items that will be lost, but that won’t be a huge amount.”
Plus, some sectors of the economy will actually benefit. Utility companies, for one, should see gains without any timing factor to even things out – people won’t stop heating their homes later in the winter because they were heating them more than usual earlier. And winter retail items, like road salt and space heaters, should get a boost.
The segment facing the largest potential negative impact could be agriculture, where weird winter weather can affect crops for the entire year. The citrus industry in California already endured a damaging cold snap in December, though both California and Florida citrus growers managed to avoid damage this week. In the Midwest, winter wheat, which relies on snow to insulate it from low temperatures, could face damage.
For the overall economy, however, even a potential $5 billion loss is just a drop in the bucket, representing just 0.3 percent of a $16.9 trillion economy as measured by gross domestic product. “It’s small enough that it’s not even noticeable,” at the end of the year, Mr. Berson says.