Tags: weather | cold | economy | impact

Experts: Brutal Weather Could Cast $5 Billion Chill on Economy

Wednesday, 08 Jan 2014 01:23 PM

By Michelle Smith

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The current spell of extremely cold weather could cost the U.S. economy $5 billion in the near term, but experts expect any economic drag to be temporary, according to NBC News.

On Tuesday, the deadly, record-shattering polar vortex caused temperatures in all 50 states to fall below freezing, NBC reported.

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This extreme weather hobbled daily life and travel plans. Thousands of flights were delayed or canceled, and Amtrak restricted rail service in some areas of the country. Schools closed and people missed work, as many businesses weren't opening.

Below-zero temperatures brought life to a virtual standstill across much of the Midwest.

These conditions will impact the economy due to lost productivity, lack of consumer spending and higher heating bills, Evan Gold, senior vice president at business weather intelligence company Planalytics, told NBC.

Monday, natural gas prices in New York City jumped nearly $60 per million BTUs, as demand for the heating fuel in the northeastern United States hit a five-year high, NBC noted.

Gold said heating costs would have a negative impact on discretionary spending in February, and possibly longer, depending on the weather.

But overall, he isn't looking for long-term economic effects from the current chill.

"We think that the problem will be short-lived, but we estimate it will cost about $5 billion because of the sheer size of the population affected — about 200 million people in the eastern two-thirds of the country," he explained.

Nariman Behravesh, chief economist for IHS Global, also told NBC any economic effects would likely be temporary.

GDP growth could shrink by 0.1 percent to 0.2 percent in the first quarter because of the weather, but " it will probably all be gained back in the second quarter," he said.

"You spend less when you are hunkered down and more later on," Steve Cochrane, director of regional economics at Moody's Analytics, told USA Today.

He said the economic impact for the national economy will be small, but it will be felt locally.

In a research note, Goldman Sachs analyst Kris Dawsey warned that cold weather in December might also show up in the data, negatively affecting Friday's jobs report.

"We expect that colder-than-normal weather during the survey period for the December payroll report probably pushed employment growth below its recent trend," he wrote, NBC reported.

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