When the weather turns rainy and chilly, do you reach for your comforter--or your credit card? Unusual though it may seem, extremely wet and cool weather spurs consumers to spend. That, at least, is the finding of Michael P. Niemira, chief economist at Mitsubishi Bank Ltd., which will be publishing his monthly Weather-Economic Barometer.
Niemira looked at data from the Commerce Dept.'s National Climatic Data Center and formulated the WEB, which measures the percentage of the 48 contiguous states in the U.S. experiencing abnormally cool and wet weather. The higher the index, the more the states that are suffering snow, rain, and chill.
Not only does Niemira find a correlation between shifts in the weather and shifts in consumer spending but he goes on to calculate that the trend explains 25% of the changes in consumer spending. And a shift in the WEB prefigures changes in outlays for as long as eight months. Niemira isn't exactly sure why rain or frost cause people to spend, but he speculates that keeping warm is a factor. "If it's cooler, the weather triggers more energy use," he notes. "And it is more conducive to shopping for heavier clothing."
So then what is the Mitsubishi Bank's WEB saying about consumers' shopping habits during the next eight months? Niemira says the drop in the index since the beginning of 1994 suggests that spending will slow into 1995. And "that comes at a critical time for the economy," he adds, since inventory overhangs and higher interest rates are already reining in growth. In other words, retailers cannot just worry about tax hikes, slower job growth, or higher interest rates as drags to consumer spending. Now, they have to fear global warming as well.