Economy hobbled by extreme weather

NEW YORK – March 6, 2014 – A batch of economic reports Wednesday lent support to the theory that extreme winter weather has been battering the economy this year and a healthy bounce-back may be in the offing this spring. Yet some economists continue to downplay the weather’s impact and say other obstacles are in the way of faster growth. The Federal Reserve’s “beige book,” an anecdotal snapshot of the economy named for the color of its cover, will likely serve as Exhibit A for the blame-the-weather contingent. It was rife with references to weather slowing hiring, factory output, retail sales and housing – providing details that may help explain a spate of weak economic data the past two months. Overall, the beige book described “modest to moderate growth” in eight Fed bank districts in January and early February, and shrinking or unchanged activity in four areas – a marked slowdown from previous reports. Retail sales slipped in most districts, particularly New York, with weather playing a major role in several areas. For manufacturers in many areas, the weather caused “utility outages, disrupted supply chains and production schedules, and resulted in a slowing of sales to affected customers,” the Fed said. Hiring, meanwhile, sputtered in the Boston, Richmond and Chicago areas, and ticked up only modestly in New York, Cleveland, Atlanta and St. Louis. Again, the adverse weather was cited as at least a partial factor. Also Wednesday, payroll processor ADP reported a disappointing 139,000 private-sector job gains in February. “Bad winter weather, especially in mid-month, weighed on payrolls,” said Mark Zandi, chief economist of Moody’s Analytics, which helps ADP compile the report. Meantime, the Institute for Supply Management said the service sector expanded at its slowest pace in four years last month, and a gauge of employment plunged to the lowest level in more than two years. Construction firms and wholesale trade companies cited bad weather as the culprit. In an analysis, Goldman Sachs said the winter of 2010 and 2011 “was similar to the current winter in temperature and snowfall.” In that period, construction, job growth and retail sales slowed, and economic growth fell sharply. But the firm said the economy tends to bounce back smartly after such skids. Consumers typically release pent-up demand for everything from cars to clothing. The beige book “gives (Fed policymakers) a reason to look past some of the soft incoming data” as it decides whether to continue to pare its economic stimulus at its March 18-19 meeting, says Dean Maki, chief U.S. economist of Barclays Capital. Copyright © 2014 USA TODAY, Paul Davidson. J.S. Carras, AP

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