- Experts say that 30% of our GDP is vulnerable to weather
- Weather in January hit GDP by about a half percentage point
- With February storms, could hit another half point dragging Q1 GDP below 3% to close to 2%
- Significance is driven by where the weather happens. Upper Midwest and Great Lakes regions are accustomed to it and so less impact
- But these storms hit broadly across the eastern half of the US with majority of population and significant percent of GDP
- Weather has significant impact on retail; and consumer is 70% of GDP
- In retail sectors like food, demand gets compressed to pre and post storms
- Hurts restaurant sales—permanent loss of sales
- Hurts all discretionary sales. Historically some of that came back, but not as much any more
- Sales get shifted now to online; that trains people to move more from bricks & mortar to online permanently
- So bad weather in general is bad for traditional retailer and could be permanently damaging while good for online and permanently impactful
- Inclement weather has a way of prioritizing consumer spending. Large retailers like Home Depot, Walmart, grocery stores and gas stations tend to do well leading up to large storms because consumers feel the need to stockpile “essentials” like food, gas, and home supplies.
- For brick and mortar stores, these winter storms have no doubt led to plunging sales. Businesses which heed warnings to close for safety reasons lose days of profits.
- For southern states, the weather has been paralyzing. But, we could see nuances in different parts of the country. Many states that are accustomed to the weather are likely to rebound faster.
- But, there is certainly a correlation between weather and sales. In March of 1993, a blizzard forced retail sales to drop 1%. And in late December of 2010, a major storm in the northeast cost retailers $1B. It’ll be interesting to see estimates from this year.
- The National Retail Federation predicted that sales would rise 4.1 percent in 2014, outpacing 2013’s 3.7 percent growth last year.
- Higher than normal heating bills could be the cause of lower consumer spending.