Weather is Unjustifiably Blamed for First Quarter GDP Decline

Last week data was released showing that the U.S. economy contracted during the first quarter of 2014 with GDP declining at an annual rate of 2.9%. The majority of government officials who have commented about the decline, as well as market bulls, have blamed the decline on the poor weather that the northeast and midwest sustained during the first quarter and have noted that there is nothing to worry about going further. There are several components to consider that can point to an unfounded belief in the weather blame on the shrinking economy.

First, how bad of a winter did we really have, and how big of an effect, if any, did it actually have on the economy. To simply blame the GDP decline on the weather as a fact is misguided as there is no absolute evidence of the overall effect. The weather blame is a scapegoat derived from the opinions of market bulls who refuse to admit the economy might be headed towards rough waters.

The first two months of 2014 did see more snow storms and colder weather than normal in the northeast and parts of the midwest. However, it was not the worst winter ever recorded, not by a long shot; this winter was not an outlier on the chart. The rest of the country, including Florida, Texas, and California, were not effected by the winter weather at all.

Furthermore, with the bad weather that was felt occurring in the first two months, consumers had the month of March, also included in the first quarter, to make up larger purchases. The blame on the weather for less economic activity is predicated on the idea that the bad weather kept people from shopping. For necessity products like food, clothes, medicine, and bathroom products, a bad week long snow storm may have kept a family trapped inside, but as soon as the weather cleared the family would have rush to the store and make up for those lost days of consumption. As far as larger purchases, think cars and television sets, a consumer planning on buying something big in February who was delayed due to weather would have had ample time to do so in March, especially with the extra time they would have had to due Internet research on those products.

The Internet brings up another component of the weather myth. Online shopping is at all time high and continues to grow as more and more consumers turn to the convenience and efficiency of buying products on their computer at the comfort of their own home. While bad weather would have delayed shipping, the weather should not have effected online purchases. Beyond that, unpredicted bad weather may have caused in increase in online shopping activity as some consumers may have been forced to buy products as a result of the bad weather that they would not have otherwise bought. Perhaps a tough guy who has never wore gloves and a winter hat in his life finally decides enough is enough and goes to his computer and buys a couple hundred dollars worth of winter accessories. Maybe a family who usually keeps their dog outside is forced to bring the pet indoors, causing them to buy a bunch of indoor pet supplies. While bad weather may have caused some products to be consumed less, it would also have caused an increase in sales in other products.

When the weather gets cold, ice cream shoppes suffer. When the weather gets cold, coffee shoppes see a boost in sales. Bad weather does not automatically mean less consumption, especially in modern times with online shopping capabilities. We had an winter than was worse than average, but not off the charts bad. This weather took place in the winter when the weather always gets cold, and there are always snow storms. Its not as if this bad weather took place in June and was totally unexpected. The weather has become the scapegoat for the contracting economy, buy there could be much larger issues at play that may point to more bad quarter to follow.