WEST CHESTER, PA (TheStreet) -- A severe snowstorm has its sights on the Northeast, and while it will interrupt millions of lives and forcing businesses to close, its economic impact should prove temporary.
Economic output in the region between Boston, greater New York City, Philadelphia totals about $2 trillion per year, just around 12% of national GDP. At 250 working days per year, daily output in the region is worth about $8 billion. Two days of lost output thus equals $16 billion, which isn't unrealistic.
These are preliminary estimates and we can fine tune them once we see what areas are hit the hardest. Still, this storm shouldn't have a significant impact on first quarter U.S. GDP, as a good chunk of this lost output will be made up in subsequent weeks.
Though economic data, including employment, are adjusted for seasonal changes to eliminate the impacts of weather and other seasonal factors to better gauge cyclical changes, snowstorms can still cause disruptions.
Potentially amplifying the storm's national fallout are disruption to northeastern seaports, airports and rail lines. The Port of New York and New Jersey is closed and thousands of flights could be canceled.
Weather normally has a temporary impact on the economy. The economic implications of a severe snowstorm differ from a natural disaster or even a colder than normal winter. A natural disaster is an economic disaster, but historically economies have bounced back quickly. While natural disasters are a big initial hit to the economy, they usually generate a lot of economic activity in the immediate aftermath. Historically, economies hit by disasters are made more or less financially whole through insurance money and government aid.
Depending on the severity of the snowstorm, its impact on the economic data will vary. Normally, unusual winter weather has significant effects on monthly nominal retail sales, housing, factory production and employment.
For retail, the impact varies by segment and the effect is lessened for an entire season. Unlike other natural disasters, snowstorms are known days in advance and consumers rush out ahead of the storm. Timing is everything. If a storm hits this late in the month it may push some spending into February.
A severe storm that prevents consumers from shopping is only a temporary drag on spending because many of the purchases put off are made up soon after the storm. For some retailers lost sales might have shifted to nonstore retailers. The big losers during severe snowstorms are restaurants because those lost sales not recouped.
Weather can cause the composition of spending to shift. Therefore, looking at only retail sales is misleading, as it does not include services, which make up the largest share of nominal consumption. Depending on power outages, the snowstorms impact on spending on electricity, heat and other utilities could vary.
Read Ryan on Moody's Analytics Dismal Scientist.