Warm winter creates winners and losers in U.S. economy
second mildest U.S. winter on record
Warm winter creates winners and losers in U.S. economy
By Edward McAllister and Jeanine Prezioso
Wed Feb 1, 2012 1:50pm EST
<SPAN class="articleLocation">(Reuters) - Halfway through what might turn out to be the second mildest U.S. winter on record, major parts of the nation's economy are feeling the impact, for better or worse.
Apparel sales have been dented, ski slopes are emptier, and there has probably been a modest impact on economic figures for everything from payroll numbers to housing starts.
But lower energy prices mean that some consumers and municipal governments will likely benefit as heating charges and snow removal costs decline. And some retailers are betting on the early sale of lawn mowers.
After two brutally long winters, the temperatures this year have been so balmy - forecasters say the average temperatures across the nation have been 3-4 degrees Fahrenheit above normal in January - that many Americans have been wondering whether the cold will arrive at all.
In January, the U.S. recorded the least amount of snowfall since the mild winter of 2006, while Canada had the second lowest snowfall amount in 50 years, according to Planalytics weather forecasters.
Natural gas prices have slumped to 10-year lows as warm weather cuts heating demand, hammering the profits of drillers and forcing firms like Chesapeake Energy and ConocoPhillips to shut in production.
In shopping malls, retailers are struggling to get rid of winter clothing as consumers do without seasonal apparel.
"We are going through peak heating season and temperatures have been well above normal for most of the nation with weather maps going into early February painting a similar picture," said Chris Jarvis, president of Caprock Risk Management in Rye, New Hampshire.
Below is a summary of some of the sectors affected:
NATURAL GAS PRICES
Energy prices offer the clearest signal that the weather isn't behaving normally, as traders scour forecast screens for a hint of how much heat households and businesses will need in the coming days and weeks.
The answer this winter: not much. November, December and January have come and gone without much sustained cold in the major energy demand centers such as the Northeast, swelling gas inventories to more than 20 percent above last year. Even oil demand has been hit slightly.
Heating degree days, a measurement that reflects the strength of energy demand for home heating, are running 12 percent below winter norms and analysts say gas storage levels will remain high unless there is an extreme and prolonged spell into early spring.
For a graphic showing the fall in U.S. heating demand: link.reuters.com/gyt36s
To return storage levels to normal by the end of winter, every single day between mid-February and mid-April would need to be 10 degrees colder than normal, according to Jan Schulte, in-house analyst at Thomson Reuters Natural Gas Analytics.
"That is simply impossible," Schulte said.
Above-normal temperatures are forecast for the first half of February, though private forecaster Weather Services International sees colder than normal temperatures across most of the northern and western United States for some weeks after that.
THE ECONOMY
The mild winter likely provided a slight temporary boost to the economy as builders broke ground on new home construction earlier than normal, though researchers at JPMorgan recently estimated this impact was minor.
Goldman Sachs estimates the weather probably led employers to add about 20,000 jobs to payrolls in December, about 10 percent of the total gain in employment that month.
Fewer snow storms allowed people to shop more readily. Without the mild weather, there may have been a small contraction in retail sales in December rather than a 0.1 percent increase, Goldman estimates.
Lower spending by households on heating in the fourth quarter subtracted a bit from economic growth during the period. The money, though, may show up eventually in higher consumption of other products and services or in a higher savings rate.
RETAIL
Warm winter weather forced many U.S. retailers to offer deeper-than-usual discounts in January to clear their shelves off winter gear ranging from coats and sweaters to boots and gloves. Meanwhile restaurants and beer sellers might see a kick up in business.
"In this economy, nobody is going to buy unless there is a need for it, and the weather says, 'You don't need it,'" said Scott Bernhardt, chief operating officer of Planalytics, which provides weather data for businesses.
"It's apparel that's hit the most," said Bernhardt, who expects outerwear sales to drop 20 to 30 percent in the month. Demand was weak for items such as snow shovels and rock salt as well, Bernhardt said.
At a Home Depot store in Overland Park, Kansas, where the temperature was an unseasonably warm 65 degrees Fahrenheit on Tuesday, snow shovels, snow blowers and other winter equipment had been relegated to a small corner at the end of the store. Prime selling space has been given over to shiny green lawn mowers.
A Target store in the Kansas City area had snow sleds on clearance last week.
Toro Co, which makes snow throwers, would not provide specifics on demand ahead of its quarterly earnings report. "Certainly the snow thrower products we sell would be negatively impacted by the lack of snow pretty much everywhere," said Kurt Svendsen, spokesman for Toro.
Instead of hats, gloves and snow blowers, what consumers may be after in balmy weather is a nice cold beer.
"Warm weather does always help beer sales in the winter. Hard to quantify how much it's helped the past two months though. Too early to tell," said Harry Schuhmacher, editor and publisher of Beer Business Daily.
LOCAL GOVERNMENT
The mild winter is delivering welcome savings to many U.S. local governments still battling drag from the financial crisis and subsequent deep recession.
Cities, counties and other local governments report lower costs on heating bills for schools and other government buildings.
Lower overtime costs for ploughing crews, less use of salt to de-ice highways, and less wear and tear on equipment and roads, have also helped local authorities.
The state of Illinois reported that it saved $50,000 in December on heating the State Capitol and other buildings it controls in the state.
In Chicago, where a single fierce blizzard blew through the city's snow budget in February 2011, the unseasonably warm December and January have barely dented the $20 million allocated for snow costs.
Plows were deployed just nine times in the past two months, versus 17 times during the same two months in the previous winter, while the amount of salt used so far is about half, said Matt Smith, spokesman for Chicago's Department of Streets and Sanitation.
But the city, where Mayor Rahm Emanuel continues to chip away at a nearly $636 million structural budget gap with layoffs and other measures, is not counting yet on any savings.
"Just like every snow flake is different, every winter is different," Smith said, adding "we still have a long way to go this winter."
Kansas City snowfall this season is just three-tenths of an inch, down from the 1981-2010 seasonal average snowfall of 19.5 inches, and following two years when snowfall annually topped 40 inches, according to Kansas State climatologist Mary Knapp.
So far this has saved at least $250,000 in overtime pay, fuel and other snow-removal costs, city spokesman Dennis Gagnon said.
"No one wants to put a number on total savings, because you never know what will happen, and last February we had a big storm," Gagnon said. "If we don't use any salt, and can use it next year, additional savings might be as much as $1.3 million."
The savings in the city's $2.75 million yearly budget for snow removal were being offset by lost revenues tied to a tax on home heating fuel use, Gagnon said.
TOURISM
Business at ski resorts in New Hampshire in the U.S Northeast is down roughly 30 percent from a year ago because of the warmer weather, hurting sales at local inns and restaurants as well as the earnings of staff, said Ben Craig, snowsports school director and resort marketing coordinator for Dartmouth Skiway in the state.
"The warmer weather has certainly impacted business," Craig said. "When people don't see snow in their front yard, it's hard to get excited to go skiing," he said.
The lack of natural snow has forced the Dartmouth Skiway to make more snow than normal, raising costs, Craig said.
"A lot of ski resorts are in more rural areas and they are the biggest economic factor in those areas," he said.
Warm-weather travel is also less on people's minds when they don't see snow on the ground, travel industry executives said.
David Fishman, president of Cadillac Travel in the Detroit suburb of Southfield, Michigan, said people have to be reminded during warmer winters that they want to go on vacation, preferably to a place where it's sunnier.
"When it's like this, people don't think about travel as much," he said. "People just aren't as quick to pull the trigger because they are not looking outside or seeing snow or ice."
(Additional reporting by Eileen Houlihan, Joe Silha, Martinne Geller and Dhanya Skariachan in New York, Karen Pierog in Chicago, Karen Jacobs in Atlanta, Michael Connor in Miami, Lisa Baertlein in San Francisco, Carey Gillam in Kansas City,; Writing by Edward McAllister; Editing by Martin Howell) |
