Flowers aren’t the only things that flourish in the spring. The
warmer weather can help stimulate consumer spending — which helps companies
grow as well.
As it turns out, weather is frequently tied directly to the
economic stability of companies. Coca-Cola CFO Gary Fayard recently said
weather contributed to the company’s disappointing second quarter.
“I hate to use the weather, but a lot of it was the weather,”
Fayard said. “We are an industry that is susceptible to weather.”
In fact, a lot of experts blamed the harsh winter weather of
first quarter 2015 for poor results. Many companies had to shut down because
their employees were snowed in and flights were cancelled. The travel industry
was impacted at every level, as were run-of-the-mill mom-and-pop shops that
missed their regular customers. Let’s face it, when it’s cold outside, nobody
wants to go shopping. Fewer still go looking for jobs, so the unemployment rate
stagnated. In April, a wealth manager at Guggenheim Partners observed that the
U.S. could potentially post zero or even negative economic growth in the first
quarter due to the punishing weather.
However, when winter closes the door, somewhere a window opens —
and that’s where spring slips in. Since 1975, harsh winters that yielded slow
growth have generally been followed by a springy economic step in the second
quarter. Many times, this growth spurt exceeds the previous fourth-quarter
growth rate, so company losses frequently have the opportunity to gain ground
and then some, despite the depressive chill.
This year, as spring began, we enjoyed a sunnier economic
forecast. Retail sales, durable goods orders and manufacturing activity
rebounded nicely. Typically in warmer weather, retailers, recreation and food
service sectors tend to perform well. In addition, there are fewer delays in
transportation deliveries and warehousing due to weather-related conditions.
In short, when the sun shines, people start spending money
again. As an economic panacea, it soon follows that when confidence and
consumer spending increases, small business owners are able to expand and offer
more jobs. In turn, businesses may be compelled to increase wages to retain valuable
employees.
Be aware, however that one negative consideration on the horizon
is that the Federal Reserve is expected to increase interest rates this fall.
This would make home buying less affordable — particularly for first-time
buyers.
Laura Hershey. Weather and Economics. March 23, 2015. “Investors
and the Weather.”http://www.weatherandeconomics.com/2015/03/23/investors-and-the-weather/.
Accessed May 5, 2015.
Scott Minerd. Guggenheim Partners. April 10, 2015. “It’s the
Weather.”http://guggenheimpartners.com/perspectives/macroview/its-the-weather.
Accessed May 5, 2015.
Ibid.
Mark Leberfinger. Accuweather.com. May 5, 2015. “US Economy
Suffers in First Quarter of 2015 as Brutal Winter Curbs Sales.” http://www.accuweather.com/en/weather-news/harsh-winter-us-economy-sales-slow-growth-spring-summer-hope/46407985.
Accessed May 5, 2015.
