Catherine Miosi
Mrs. Straub
Economics/ B3
3 November, 2014
Economy Freeze
Last winter the midwest experienced below average cold weather with the northeast states getting hit the hardest. Living in Wisconsin, we know what it’s like to experience the harshest of weather, but do we realize the impact it can have on our economy?
The United State’s GDP dropped 2.9% in the first quarter of 2014. The first quarter includes the months January, February, and March, during which the US suffered through below average cold temperatures. Economists believe this weather was a prominent factor in why our GDP dropped rather than increased.
The agriculture industry took the biggest hit during the first quarter, dropping 31% from the preceding period due to a decrease in production of farm goods. Surprisingly, the utilities industry suffered the second largest drop of real value added to the net GDP. Although there was an increased demand for electrical utilities such as heating systems, there was also an increase in price of materials and energy that caused such a large drop in the real value added. While some industries were only affected minimally during the 2014 winter, most major industries didn’t do as well as economists were expecting.
The cold winter weather also hit the airline industry hard. In January alone, 39,000 flights were cancelled. Due to the cancellations, the airline industry lost billions of dollars in additional costs. The flight cancellations didn’t only impact the airline industry, it also impacted hotels and workers who were unable to travel to where they needed to be.
Warmer states like Florida and California benefitted from the cold weather. A positive externality of the cold front was that tourism soared in the warmer states such as California, Arizona, and Florida. Many people were wishing to escape from the extreme cold to be under more comfortable circumstances. The increase in purchased airline tickets to these vacation destinations helped to eliminate the loss airlines suffered from the flight cancellations, but it didn’t offset the loss completely.
Due to the large quantity of snow and ice, there was an increase in demand for salt causing suppliers to increase the price of the good. In order to keep the roads cleared and safe, the government had to spend more money than expected in order to keep the roads plowed and salted. Along with that, some smaller cities experienced a shortage of salt because the salt mines were at maximum production. When you’re looking at an economy having a shortage of a necessary good, you know that’s never a good position to be in.
When the temperature is below freezing and the roads are a dangerous snow filled mess, no one wants to leave the house. This creates a problem because it means consumer consumption rates will decrease drastically. When people are stuck in the house, they aren’t out spending money shopping or at restaurants and other entertainment facilities. In result, the percent growth in GDP will be affected in a negative way.
Overall, the harsh 2013/2014 winter had a negative impact on the United States economy. As the winter season nears again, for my personal sake and for the economy, I hope that it’s not as cold as the last one. However, as of right now meteorologists predict another freezing winter coming our way.
Works Cited
Domm, Patti. "Off-the-charts Weather May Be Net Bad for Economy." CNBC. CNBC LLC. Web. 4 Nov. 2014.
"GROSS DOMESTIC PRODUCT BY INDUSTRY: FIRST QUARTER 2014." BEA : News Release: Revised Gross Domestic Product by Industry. Web. 4 Nov. 2014.
"New BEA Data Provide Insights on How Harsh Winter Impacted Industries in First Quarter." US Bureau of Economic Analysis. 25 July 2014. Web. 4 Nov. 2014.
Jones, Stacy. "Economists Track Harsh Winter's Effects." NJ.com. 12 Feb. 2014. Web. 4 Nov. 2014.
I haven't paid much attention to how our GDP might be affected by our weather. I just assumed that other companies would benefit more and so on making up for the previous lack of. However, that clearly is wrong as the GDP decreased. So if our winters get so cold at times that stores shut down for a couple days along with the majority of people, to what extent does that lost of sales and spending effect our economy as a whole? Can a few very cold days really do that much harm? Even though we have Christmas to boost our winter economy, are we really seeing the benefits of such holidays?
ReplyDeleteThis is one of the most well written articles that I have ever placed my eyes on. I was engaged throughout the whole thing and that can be attributed to your very involving writing style.
ReplyDeleteNow speaking of the actual content, I think that this was a very interesting topic. In fact, I think it was the most interesting that I have read all year. My father owns a heating and cooling company and he is pumped about this upcoming winter because of the harsh temperatures predicted. For him the cold is a dream come true! But now I see that for our economy, the cold winters can freeze of production. Thank you for bringing this to my attention, I find this sort of thing super interesting.
This was a great blog post Cat! It’s weird to think about how something so simple, like the weather, can have such an impact on our economy. What really surprised me though was the amount of flights cancelled over the course of last winter, because 39,000 is a huge number. The demand for airline tickets is always on the rise, so when they weren’t able to supply consumers with their demand, surely the economy is affected by it. As you said, not only did this affect the money coming from the plane tickets, but also money that could have been used at hotels or attractions at these destinations. As well as possible workers not being able to get to where they needed to be. Overall, I think there are a lot of underlying factors as to why our economy struggles at some points, and you did a great job of pointing out weather as one of them!
ReplyDeleteThis was astonishing. You really hit the nail on the head with this blog post Catherine. I think that the winter season is a real bad thing for most companies because people aren't going to want to go outside and shop as much as they did before. I do think however that online stores can really thrive in this environment. With more people staying at home it makes it easier for the consumer to shop online. That graph you had really just opened my eyes, and kind of changed my life in a way because it really shows the difference one quarter can make to an economy. The winter season is truly a very good thing for some economies and a very bad thing for others.
ReplyDeleteDear Catherine, I really enjoyed your article. We have all been complaining about how much we hated last years winter because of all of the snow and cold weather but I never realized that its impact was more than on our personal lives. I enjoyed reading your post as it gave a new perspective to an event we all remember. Personally speaking I kind of enjoyed last years winter, except when it got into the negative forties, but now that I know the economic impacts I don’t think I will look forward to a winter like that again! My only question on your topic was the fact that this year is supposed to be the same or worse! If our weather continues to act in this way for a long period of time how are we going to grow? I think if this does become a permanent weather pattern our country is going to have figure out a way to do things differently. We will have to work around the cold weather or figure out a way to turn the cold weather into something profitable. I’m not really sure how we would be able to do this, to be honest, that’s a question for a later date I suppose. Thanks for the thought provoking read!
ReplyDeleteNice job cat! It did a very nice job stating the percentages and putting information that would rather be unknown by most civilians. It’s really shocking that the agriculture could decrease so much in only three months, a long with out GDP going on down in those moths. Maybe more people also don’t tend to leave the house as much because of the scare of getting into a car crash which would then bring down the GDP even more because people aren't buying as many things. One thing that we also have to take into account, while some companies and the majority is decreasing in GDP, there are companies that benefit from the weather conditions for example snow plowing. In general, I guess we aren't the only ones that suffer from the cold, our GDP also get impacted greatly.
ReplyDeleteHey Cat! I think that this is very unique topic that you're writing about and also very interesting. When we had the cold days lat year I was just so happy about it all and never really contemplated how the cold days and our overall terrible winter could impact our economy. I think it's very interesting how you brought to our attention that because of the high demand of salt, companies were able to increase their prices. However, since the government also had to purchase some of this salt to clear the roads, this money only comes out from tax payer's pockets. Not only that but since the weather was so bad people probably stayed home, which prevented them from spending their money on other things. Due to this, it makes sense that the first quarter's GDP decreased, since the terrible weather definitely discouraged people to leave the comfort of their homes!
ReplyDeleteIt would be interesting to see how the internet shopping industry was affected by the harsh winter. Since consumers are stuck inside, it’s reasonable to assume that they are more willing to shop online than go to the store. However, there’s also probably an increase in costs related to online shopping since the products must be delivered potentially across the country. This journey is more costly because of the harsh weather, so supply may decrease. Accordingly, supply decreases as demand increases, presumably driving the price up.
ReplyDelete