http://blogs.wsj.com/economics/2015/01/26/yes-a-northeast-blizzard-can-slow-u-s-economic-growth/
The article argues that snow storms are bad for the economy in the short run, but beneficial to the economy in the long run. According to the article, when snow hits majorly populated areas, such as New York City and Boston, where a considerable amount of economic activity takes place, "if activity is slowed for a few days, it could have an impact on GDP".
A forecasting group estimated that the unusually harsh weather last winter knocked .1 percentage point off of the fourth quarter GDP of 2013 and 1.4 percentage point off of the first quarter of 2014.
However, GDP bounced back in the second quarter of 2014 and accelerated in the third, suggesting severe storms tend to delay economic activity, rather than eliminate it, and that weather may also distort economic indicators.
A Federal Reserve Bank of Philadelphia paper from earlier this year called for incorporation of unusual weather effects into data.
Ben Herzon, senior economist at Macroeconomic Advisers, suggested that while most production will return to normal, some production will be irretrievably lost during major snowstorms. According to Herzon, exactly how much production is lost depends on the scale of the storms.
I think this is a great example of how external or unusual factors can impact GDP.
The article argues that snow storms are bad for the economy in the short run, but beneficial to the economy in the long run. According to the article, when snow hits majorly populated areas, such as New York City and Boston, where a considerable amount of economic activity takes place, "if activity is slowed for a few days, it could have an impact on GDP".
A forecasting group estimated that the unusually harsh weather last winter knocked .1 percentage point off of the fourth quarter GDP of 2013 and 1.4 percentage point off of the first quarter of 2014.
However, GDP bounced back in the second quarter of 2014 and accelerated in the third, suggesting severe storms tend to delay economic activity, rather than eliminate it, and that weather may also distort economic indicators.
A Federal Reserve Bank of Philadelphia paper from earlier this year called for incorporation of unusual weather effects into data.
Ben Herzon, senior economist at Macroeconomic Advisers, suggested that while most production will return to normal, some production will be irretrievably lost during major snowstorms. According to Herzon, exactly how much production is lost depends on the scale of the storms.
I think this is a great example of how external or unusual factors can impact GDP.
8 comments:
I found this very interesting to see how external forces can hinder or delay economic growth for the areas that are affected in these regions. I wonder if there is a historical trend that shows slower/delayed economic growth during this quarter for the cities that have high economic activity like New York and Boston. If there is a historical trend in this issue, could the government of the states devise a plan to prepare for situations like this in order to make sure economic activity continues rather than being stopped during these harsh weather conditions?
Emily, this is a very interesting article. It is easy to forget about the external factors of weather on production and consumption. Do you feel that consumption and production will smooth out over the year and correct for these short term disturbances? I know the article suggested that GDP bounces back throughout the year, but it is tough to be sure about what growth would have been in an ideal climate. I feel that Chase raises a valid point about the need to study historical trends in this area.
Emily, this is a great article, however I agree with Chase is there historical evidence to prove this. They could many other factors that cause GDP to grow in the next quarter. Ho
Yes, it is easy to forget about the external factors of weather on production and consumption. I feel as though this will not hinder our production and consumption over the year, but historical evidence would be beneficial to backing this point. In all we do not consider external factors such as weather when it comes to thinking about our GDP.
I agree with Will's comment. While some external forces will have a negative affect on some production, however the amount of harm that is being done is minimal. The areas in which production is greatly hurt is in areas that have large amounts of agriculture. For example, last week Florida reached the 30's (temp) for the first time in a very long time. This will have a far greater affect on production and consumption than the weather will in northern areas of the country.
It is interesting to see how these outside forces effect the economy. It is possible that they are also one of the reasons gas prices have gone down recently. With demand being down the supply has increased. This would explain a drop in price.
It is interesting to see how these outside forces effect the economy. It is possible that they are also one of the reasons gas prices have gone down recently. With demand being down the supply has increased. This would explain a drop in price.
http://www.cnbc.com/id/101713801#.
Here is an article that discussed the lowering GDP because of the weather. It says that the weather is potentially lowing the GDP minimally. Also, this weather is abnormal and historically would not be able to be backed as much because feet of snow falling spontaneously is a newer occurrence. It does make sense that GDP would fall because consumption decreases within these harsh weather conditions because stores close and people do not leave their homes to buy many things during the horrific weather. Also, during this time of freeze I would assume that imports and exports on these days would either be delayed or minimal which might also affect the GDP. I think this is a very interesting topic because the economy can effect the environment, especially when mining and extracting natural resources, and the environment can effect the economy.
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