The unusually harsh winter weather has had a very clear unfavorable impact on the U.S. economy.
The only businesses that seem to be doing well are the utility companies. “Output at electric and natural gas utilities surged 4.1 per cent on strong heating demand because of the extremely cold weather,” said the Federal Reserve in Friday’s industrial production report.
Oddly, nonstore retail sales fell 0.6% month-over-month in January. These are online sales, a corner of the retail sector that could’ve benefited from consumers holed up in their homes.
Some economists took notice:
“…However, with online sales also dipping, after steady growth during the previous four months, there may be some indication that other factors beyond the usual weather effect suspect may be at play…” -Millan Mulraine, TD Securities
“…However, movements in some other components are more difficult to square with that as a catch-all explanation — such as a drop in internet sales and a strong gain in building materials…” -Peter Newland, Barclays
“…Although consumer spending over the internet declined, 0.6 per cent, as well. Too much shoveling snow…” -Chris Rupkey, Bank of Tokyo-Mitsubishi
Hopefully, Rupkey is right and it was just “too much shoveling snow.” Or maybe it’ll get revised away.
Speaking of revisions:
“On the headline measure, sales were revised down in each of October, November, and December, such that growth in Q4 as a whole is now estimated to be an annualized 3.2% q/q (previously 4.2%, Figure 1),” said Barclays’ Newland. “Core sales were down 0.3% in January and revised lower in December and November as well, such that our Q4 GDP tracking estimate fell by four-tenths to 2.2% q/q (saar). While some positive payback can be expected later in the quarter (absent the possibility of continued negative weather effects in February), the decline in January puts consumption on a weak grounding for Q1.”
For now, we’ll hold our breath until we see whether or not this is weather or not.