Economy Freeze
Catherine Miosi
Mrs. Straub
Economics/ B3
3 November, 2014
Economy Freeze
Last winter the midwest experienced below average cold weather with the northeast states getting hit the hardest. Living in Wisconsin, we know what it’s like to experience the harshest of weather, but do we realize the impact it can have on our economy?
The United State’s GDP dropped 2.9% in the first quarter of 2014. The first quarter includes the months January, February, and March, during which the US suffered through below average cold temperatures. Economists believe this weather was a prominent factor in why our GDP dropped rather than increased.
The agriculture industry took the biggest hit during the first quarter, dropping 31% from the preceding period due to a decrease in production of farm goods. Surprisingly, the utilities industry suffered the second largest drop of real value added to the net GDP. Although there was an increased demand for electrical utilities such as heating systems, there was also an increase in price of materials and energy that caused such a large drop in the real value added. While some industries were only affected minimally during the 2014 winter, most major industries didn’t do as well as economists were expecting.
The cold winter weather also hit the airline industry hard. In January alone, 39,000 flights were cancelled. Due to the cancellations, the airline industry lost billions of dollars in additional costs. The flight cancellations didn’t only impact the airline industry, it also impacted hotels and workers who were unable to travel to where they needed to be.
Warmer states like Florida and California benefitted from the cold weather. A positive externality of the cold front was that tourism soared in the warmer states such as California, Arizona, and Florida. Many people were wishing to escape from the extreme cold to be under more comfortable circumstances. The increase in purchased airline tickets to these vacation destinations helped to eliminate the loss airlines suffered from the flight cancellations, but it didn’t offset the loss completely.
Due to the large quantity of snow and ice, there was an increase in demand for salt causing suppliers to increase the price of the good. In order to keep the roads cleared and safe, the government had to spend more money than expected in order to keep the roads plowed and salted. Along with that, some smaller cities experienced a shortage of salt because the salt mines were at maximum production. When you’re looking at an economy having a shortage of a necessary good, you know that’s never a good position to be in.
When the temperature is below freezing and the roads are a dangerous snow filled mess, no one wants to leave the house. This creates a problem because it means consumer consumption rates will decrease drastically. When people are stuck in the house, they aren’t out spending money shopping or at restaurants and other entertainment facilities. In result, the percent growth in GDP will be affected in a negative way.
Overall, the harsh 2013/2014 winter had a negative impact on the United States economy. As the winter season nears again, for my personal sake and for the economy, I hope that it’s not as cold as the last one. However, as of right now meteorologists predict another freezing winter coming our way.
Works Cited
Domm, Patti. "Off-the-charts Weather May Be Net Bad for Economy." CNBC. CNBC LLC. Web. 4 Nov. 2014.
"GROSS DOMESTIC PRODUCT BY INDUSTRY: FIRST QUARTER 2014." BEA : News Release: Revised Gross Domestic Product by Industry. Web. 4 Nov. 2014.
"New BEA Data Provide Insights on How Harsh Winter Impacted Industries in First Quarter." US Bureau of Economic Analysis. 25 July 2014. Web. 4 Nov. 2014.
Jones, Stacy. "Economists Track Harsh Winter's Effects." NJ.com. 12 Feb. 2014. Web. 4 Nov. 2014.
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