Harsh Weather Puts Economy on Ice

(Pittsburgh Post-Gazette/MCT) -
Jeff Ross-Bain cross-country skis from Piedmont Park across the 17th Street bridge past Atlantic Station, Thursday, Feb. 13, 2014, in Atlanta. (John Spink/Atlanta Journal-Constitution/MCT)
Jeff Ross-Bain cross-country skis from Piedmont Park across the 17th Street bridge past Atlantic Station, Thursday, Feb. 13, 2014, in Atlanta. (John Spink/Atlanta Journal-Constitution/MCT)

Joe Pawlak, who has been in the food-service business for 25 years, doesn’t hesitate to label this one of the worst winters for restaurants and other food operators: “This is as bad as I’ve seen it.”

Next week, the senior vice president of Chicago-based food-consulting group Technomic Inc. will lead a webinar titled “The Wicked Winter of 2014: Impact on Consumer Eating Out and Operator Sales.”

There have been a lot of names given to the winter of 2013-14 – few of them complimentary – but economic analysts are still waiting to gauge the final impact of the meteorological misery.

Snow, ice and frigid temperatures are a factor in slowing down many businesses, resulting in cars sitting on dealers’ lots, stalled sales of existing homes, shipping companies struggling to get deliveries out and retailers waiting by the door for customers.

But that’s the short term. The longer-term implications for the economy are less clear. Analysts say some sectors may be able to shrug it off as temperatures warm up, while others could have a harder time recovering.

Restaurants, for example, can’t make up lost dinner checks in the same way that a car dealer might make up a lost sale. A meal eaten elsewhere is done and over. “You’ve lost all those opportunities,” Pawlak said. Technomic is in the midst of surveying restaurants, hotels and school-cafeteria operators to see if it will need to pull back on the projection it issued in January for 3.5 percent growth industrywide this year.

And winter is not even over yet.

Matt Rogers, founder and president of Bethesda, Md.-based Commodity Weather Group, late last week was looking for two to three more weeks of “impressive cold.” His consulting firm works with about 240 companies – ranging from hedge funds to banks, food companies and utilities – that are affected by shifting energy and food prices.

“It’s been a crazy winter,” Rogers said.

Last fall, the firm forecast a colder winter than the previous one, but the season has exceeded expectations. Rogers said the period from Dec. 1 through the end of February has been the coldest since the 1981-82 season. “It’s having some very important impacts.”

Natural gas prices are up under the weight of the demand, although the influx of natural gas from domestic sources has helped avoid a shortage.

“It could have been a lot worse,” Rogers said, noting that a 2003 winter that wasn’t this cold caused a scare about the natural gas supply.

Winter wheat – wheat that’s planted in the fall, goes dormant in the winter and then is harvested after growing again in the spring – could be threatened by this latest round of extremely cold temperatures, said Joel Widenor, founder, vice president and director of agricultural services for Commodity Weather Group.

So far, crops growing in places such as Nebraska, Kansas and Indiana have avoided a lot of damage because of all the snow that creates a sort of blanket that protects the dormant wheat, Widenor said.

But that big melting period last week that gave some relief to stores, restaurants and shippers could hurt the farmers – and, in turn, the commercial bakers who rely on that wheat.

Which is a reminder that there are winners and losers in everything.

“We’re seeing exponentially more activity from winter-focused clients,” said Joe DeRugeriis, director of marketing for Planalytics, a business weather intelligence company near Philadelphia. Anyone selling things like snow blowers, shovels, outerwear and scarves has been okay with the stormy weather – to a point.

Retailer Dick’s Sporting Goods, a Planalytics customer that includes snow gear and coats in its inventory, earlier this month raised its earnings projections for the quarter that ended Feb. 1. In previous, warmer winters, Dick’s has been stuck with cold-weather inventory.

Still, the economic fog from the storms hasn’t yet cleared. “Harsh winter weather is masking the performance of the broader economy,” the National Retail Federation’s chief economist, Jack Kleinhenz, complained in a mid-February report on January’s numbers.

“Extreme temperatures and severe ice and snow are making it increasingly difficult to assess if the retail sales slowdown is temporary or a telling sign of a longer lasting weakness in the consumer-fueled economy. No one can jump to any solid conclusion until we shovel out of the snow.”

That effort to see further out has broader implications, too.

The stock markets took a chill in early February after the Institute for Supply Management issued a report that showed, among other things, a gauge of new orders in the manufacturing sector had dropped 13.2 percentage points from December, an “almost unprecedented” drop, according to Bradley J. Holcomb, chair of the ISM’s manufacturing business survey committee.

Weather that closed some businesses and slowed deliveries was probably a factor in that number, he said, as well as in the 6.9-percentage-point drop in the ISM’s production index during the month.

Yet, said Holcomb, “all things considered, my sense is this is a short-term blip and it will be made up.”