Bad Weather a Temporary Hitch in U.S. Recovery, Economists Say
A strengthening U.S. recovery means the depressing influence of the winter storms that disrupted travel from Chicago to New York over the past few days and blanketed much of the country in January will be temporary, economists said.
Sales at chain stores fell 0.9 percent in the month ended Jan. 29, cutting the gain over the past year to 1.8 percent, the smallest since May, according to figures from Johnson Redbook Research issued yesterday. Snow and cold temperatures may have reduced January payrolls by 60,000 workers, according to a forecast by economists at UBS Securities LLC.
Weather “will have an impact on January data for sure,” Kevin Cummins, a UBS economist in Stamford, Connecticut, said in an interview. “For the rest of the quarter, we would expect it to unwind and return to normal.” UBS forecasts the world’s largest economy will grow at a 4.2 percent annual pace from January through March, a point more than the prior quarter.
Growing consumer confidence, expanding manufacturing and increasing demand from overseas indicate the world’s largest economy as a whole will probably overcome the effects of bad weather. A report from the Institute for Supply Management yesterday showed manufacturing expanded last month at the fastest pace in more than six years.
A snowstorm may have cut 70,000 workers from the payroll count for January because it hit during the week covered by the Labor Department’s survey of employers, according to Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. The storm spread from the Midwest and the South to Boston. Employment probably increased by 140,000 last month, according to the median forecast of economists surveyed by Bloomberg News ahead of the Feb. 4 report.
UBS economists estimate that temperatures last month were 4 degrees Fahrenheit (15.6 degrees Celsius) below average after being 1 degree below normal in December. Such a swing has historically subtracted about 0.5 percentage point from retail sales, according to their calculations.
To be sure, there will be winners and losers, said Chris Christopher, an economist at IHS Global Insight in Lexington, Massachusetts. Restaurants will probably show the biggest slowdown in sales, while Internet merchants may prosper.
“Restaurants don’t like this stuff at all,” Christopher said in an interview. “You don’t make up that missed meal later in the month.”
On the other hand “there is some evidence that when people stay at home, they do more online shopping,” he said.
December’s report on retail sales provides evidence that a late-month storm may have played havoc with holiday shopping and dining. Purchases at restaurants and bars climbed 0.2 percent, less than half the November increase, while demand in the category that includes Internet retailers jumped 2.6 percent, the biggest gain in more than two years.
The first bits of data for January have shown little sign of a letup. The ISM’s factory index climbed to 60.8 last month, exceeding the most optimistic forecast in a Bloomberg News survey of economists and the highest level since May 2004. Autos sold at a 12.5 million annual pace, matching the December level as the highest since August 2009, when the government’s cash- for-clunkers boosted demand.
“While some economic reports in January and February may get clipped by the severe weather,” John Ryding, chief economist at RDQ Economics LLC in New York, said in a note to clients yesterday, the ISM report “confirms that underlying growth momentum is quite strong in early 2011 and we would expect the economy to bounce back from any such effects as soon as the winter storms are behind us -- whenever that might be.”
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