Unusually warm weather could spur economic growth in the fourth quarter as construction forges ahead and lower heating bills free up money for spending.
Still, not everyone is celebrating. The tourism industry, which was already suffering from the effects of Sept. 11, is seeing a slowdown as a result of the high temperatures, while retailers who sell seasonal merchandise are also feeling the pinch.
Last month was the second-warmest November on record and was 5.5 degrees above average, according to the National Climatic Data Center. Jon Davis, meteorologist at Salomon Smith Barney, believes the trend will continue for a while longer.
Dogs of Warm
"The weather is wreaking havoc on everything from tourism to fur coat sales," said Diane Swonk, chief economist at Bank One. "I went to Phoenixlast week, and it was cooler there than here
in Chicago. People are much more likely to head south if there's a 20-degree wind chill."
In addition, noted Ray Stone, economist at Stone & McCarthy, many ski resorts have witnessed a slowdown in traffic because of a lack of snowfall.
, the largest ski operator in the U.S, said several resorts on the East Coast had delayed openings, while others had to shut down. The firm's corporate results will be released later this week.
Meanwhile, store executives in many regions have blamed slower sales of winter clothing on above-normal temperatures.
Same-store sales rose 2% inNovember and just 0.9% excluding
, partly because of weak demand for sweaters, jackets and hats.
Still, some economists maintain that springlike weather should benefit the retail industry in general. Retail sales are expected to have climbed7.1% in November, and while that's mainly due to interest-free financing for autos, some believe the mild weather also played a part. Sales excluding autos are seen as up 1%.
"Warm weather helps retailers in two ways," said David Littmann, chief economist at Comerica Bank. "It means that traffic is strong, and it keeps heating and gasoline prices very low."
Prices of heating oil and natural gas have fallen 25% to 30% since Sept. 11, while demand has fallen 4% to 5%, according to Richard Berner, economist at Morgan Stanley. This should free up some $35 billion in discretionary spending power, he said.
In addition, economists say construction, which typically falls off in winter, shows no sign of slowing down and this should help prop up the economy.
"Construction would have normally subsided by now, but it looks like it's going to be as vigorous as September and may well make the difference between a positive and negative quarter," Littmann said.
Friday's employment report showed that construction employment was "essentially unchanged" after seasonal adjustments.
"I think the recent spate of warm weather will give an added fillip to economic activity, bolstering the perception that the recession is over," said Berner. "Housing starts, commercial building and highway and street construction in November and December will likely appear above normal levels."
Berner believes the boost to the economy from warmer weather could amount to 0.2 to 0.3 percentage points of
gross domestic product in the fourth quarter.
In the first quarter of 1998, the fourth quarter of 1998 and the fourth quarter of 1999, the economy grew 2.5% sequentially, partly due to benign weather conditions, noted Gary Thayer, chief economist at A.G. Edwards.
"If the economy were strong, the weather would probably boost it, but as we're so weak, it'll just add some support."
Still, economists note that some of the vitality, like that in housing, is being borrowed from the future. The fall of 2000, which was one of the coolest on record, depressed activity, and this led to a positive snapback when the weather improved in January and February. Some believe the opposite could be the case this year.
"When the payback arrives, it may make the economic recovery seem anemic," Berner said.
But some economists are not convinced there will be a "payback." Indeed, mild weather can create income and spending, which can spill over into future quarters. In addition, temperatures could remain above normal.
Weather.com believes the upcoming winter will be a mainly "neutral" one, with no more than very weak La Ni¿a or El Ni¿o conditions. El Ni¿o contributed to the unusually warm winters from 1997 to 1999. Some sources call for warm temperatures to persist through the month of December, but others suggest cooler conditions after the first half of this month.
"A lot depends on the weather," said Thayer. "And that's hard to predict."