How the Weather Will Effect the coming Q1 GDP

February data

• Huge snowstorms will have an impact on February economic
reports, reducing payrolls by about 150,000
• Auto sales, core retail sales, and housing starts are
also likely to be depressed
• Much of the lost activity will be made up in coming
weeks; effect on 1Q09 real GDP likely to be small

Over the past week, two severe storms hit the East Coast of
the United States and dropped record amounts of snow on
several large cities. Large-scale power outages and disruptions
to the transportation grid shut down businesses and
schools, closed airports, and kept millions of people housebound
for at least a few days. Since these storms hit highly
populated areas, they could have a noticeable effect on the
February economic data. The worst of the disruptions occurred
during the week of the February labor market survey,
so the impact on the February jobs report could be especially
significant.

Other measures of activity, including retail sales, housing
starts, and industrial production, were clearly interrupted
for at least a few days. But the impact on the monthly data
is far from clear. For example, snowstorms doubtless depressed
discretionary consumer spending this past week,
but much of that spending may simply be pushed into the
latter half of February. Similarly, storms shut down some
factories for a few days, but the lost production in the
storm areas may have simply been diverted to factories in
other regions or be made up by unusually high levels of
output at affected facilities through the rest of the month or
the quarter.

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