One of the persistent arguments we hear is that the strength the economy is showing through the first quarter is the result of favourable weather conditions, and that as soon as we return to more seasonal temperatures, we’re going to see some giveback.
Well, it is true that the weather has been unseasonably warm throughout the country.
Probably everyone has seen some variation of this chart from Goldman measuring Heating Degree Days, and how they’re way down this year.
Photo: Goldman Sachs
But it’s really dicey to connect the warm weather to the stronger economy, and in fact there’s plenty of counterevidence, including today’s construction report.
Construction was supposed to be one sector that would OBVIOUSLY benefit from the warm weather, and yet it hasn’t. For the last two months, constructions pending has been negative.
Further confirming this number is the fact that construction employment actually fell in the last month.
So clearly, the #1 sector that would supposedly benefit from warm weather is not doing so hot (ominously, we might add).
There are other ways in which the warm weather is clearly acting as a drag on the economy.
Capacity utilization and industrial production numbers have been subpar lately thanks to the fact that utilities aren’t operating at full pressure. The rail industry is seeing weak volume due to low coal volumes.
Oh, and finally we saw this picture in the latest toy report from BMO’s Garrick Johnson.
Sleds have been piling up malls. Thank of the sled-makers!