Storms impact economy
The severe weather that hit much of the country this winter cost the economy nearly $50 billion in lost productivity and 76,000 jobs, according to a new survey.
And the debilitating effects of Old Man Winter hit factory production, which last month fell the most since the Great Recession ended, the Federal Reserve said Friday.
Manufacturing output dropped 0.8 percent in January compared to the previous month, the first decline since July and the biggest falloff since May 2009.
The decline was “partly because of the severe weather that curtailed production in some regions of the country,” the Fed said. It did not identify other factors.
Snow, ice and bitter cold will shave about 0.3 of a percentage point from economic growth, according to Wall Street economists, fund managers and strategists polled by CNBC.
In an economy with about $15.7 trillion in total output, or gross domestic product, that comes to about $47 billion.
The weather that made much of the country at times look as if it could host the Winter Olympics also hindered labor market growth, partly causing the disappointing government jobs reports in December and January.
Survey respondents estimated storms and cold cost the economy 32,000 jobs in December and 25,000 in January and would reduce payrolls by 19,000 this month.
University of Maryland economist Peter Morici estimated the rough weather — such as the snowstorms that struck Washington, D.C., and much of the East Coast last week — would cost the economy $20 billion to $40 billion.
“The country braces for cold and storms each winter, but this year’s conditions are more severe than cities and counties customarily prepare to address,” he said.
The bad weather was blamed this week for a 0.4 percent drop in retail sales in January compared with December.
And the decline in factory output caused overall industrial production to fall unexpectedly by 0.3 percent in January, the Fed said. That was the first drop since July and the biggest since last April.
The poor weather conditions probably forced some facilities to close and hampered shipments, said Chad Moutray, chief economist for the National Association of Manufacturers.
“To the extent that weather was a contributing factor, I would expect manufacturing production to rebound in the coming months,” he said.
The bad weather took its toll outside the manufacturing sector as well.
Mining production fell 0.9 percent last month because cold temperatures caused slowdowns at oil and gas facilities, the Fed said.
And output of automotive products was down 5.1 percent, contributing to an overall 0.5 percent drop in production of consumer goods. It was the first time in six months consumer goods declined.
But there was one plus to the bad weather: It helped electricity and energy supply from utilities rise 4.1 percent “as demand for heating was boosted by unseasonably cold temperatures,” the Fed said.
Morici said unlike decades ago, when lost factory time was difficult to make up, the modern service economy should recoup much of the weather losses in the second quarter of the year.
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