Here’s How the Winter Deep Freeze Will Affect the U.S. Economy

A winter storm sweeping the U.S. East Coast after a week of very low temperatures is probably boosting demand for boots and mittens– and thanks in part to its timing, it shouldn’t chill economic data more broadly.

Home sales and spending at restaurants could see a short-term dip, but against a backdrop of steady demand and a solid economy, that should amount to little more than a blip. And other businesses, such as utility providers and food-delivery companies, will benefit.

The winter storm and chill are hitting before the Department of Labor’s reference week for employment data, so the effects probably will have little impact on jobs figures. And because the weather disruption comes just after the winter holidays, the freeze isn’t choking off in-store shopping during a crucial season.

Still, unusual temperatures and storms can cause major disruptions if protracted, so all bets are off if the cold snap and snowy weather persist for longer than currently forecast. And even if the deep freeze is short-lived, it could become a convenient scapegoat for any first-quarter economic weakness, which has been chalked up to seasonal-adjustment issues or bad weather in recent years.

“Within a quarter or two, any weakness in the first quarter data will be blamed on this week,” said Michael Hanson, chief U.S. macro strategist at TD Securities in New York. “I am not a big believer in these weather stories, but they’re extremely popular in the markets.”

Cozy Up
Americans’ demand for cold-weather products has probably spiked in first week of January

Winter storm warnings covered parts of 13 eastern states on Thursday, while blizzard warnings applied to the U.S. coast from North Carolina to Maine, including New Jersey, Long Island and Boston. Governors in several states had declared emergencies. Many in Virginia had lost power, and thousands of flights were grounded.

While temperatures well below freezing are expected in the Northeast through the weekend, by Monday things should warm up — just in time for the Bureau of Labor Statistics’ reference week, which is always the calendar week or pay period containing the 12th. Survey data covering that particular period form the basis for the January employment report, due Feb. 2.

“I suspect it probably won’t have too much of a lingering impact,” said Omair Sharif, senior U.S. economist at Societe Generale in New York. He said housing starts could be softer, but only temporarily. Retail sales data could take a small hit, but that should get made up quickly, he said.

Timing is on the side of retailers.

“It’s a huge difference that this is happening now, versus last week or the week just before Christmas,” said Evan Gold, executive vice president of global services at Planalytics, a Berwyn, Pennsylvania-based company that traces weather-related business trends.

Planalytics expects restaurant traffic in the Northeast to be down 10 percent from the usual level in the first week of January, but spending on things like hats, boots and heaters will be up in the North and the nation as a whole.

“The losers would be anything that’s discretionary that would require people to go out of their house,” Gold said. Still, even those businesses suffering a hit will only have to put up with short-lived pain.

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