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Old Man Winter and the economy

By Mark Hamrick ·
Monday, February 10, 2014
Posted: 6 am ET

With the repeated, unusually punishing blasts of winter weather whipping much of the country, the economy has been caught in a white-out. For those of you in warmer climates, that's when drivers are unable to see anything but blinding snow.

Remember Groundhog Day, when Punxsutawney Phil saw his shadow and predicted six more weeks of winter? That might be the best near-term economic forecast we've got. And it would not be a good one, based on what's been going on with the weather and the economy.

Washington weather permitting, new Federal Reserve boss Janet Yellen is expected to provide her take on the economy as she testifies before a House panel on Tuesday and a Senate panel on Thursday in her first appearances before Congress since taking the Fed chairmanship.

Between recent reports on jobs, auto sales and manufacturing, Old Man Winter has been the economic whipping boy of late, taking the blame for many ills.

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Car sales freeze up in the cold

A harsh winter causes the car business to sputter. Will sales thaw when the cold weather eventually eases its grip?


Consumer clues

In the coming week, the reports on the economy hit a bit of a dry spell. They include:

  • The Commerce Department reports on January retail sales Thursday at 8:30 a.m. (all times Eastern).
  • The Federal Reserve reports on January industrial production Friday at 9:15 a.m.
  • The University of Michigan reports on February consumer sentiment Friday at 9:55 a.m.

See, we told you there wasn't much.

The focus ultimately always comes back to the consumer, responsible for the bulk of the economy's activity. Consumer spending is "reasonably solid," says Jim O'Sullivan, chief U.S. economist with High Frequency Economics. Still, he says he wouldn't be surprised if the retail sales report was "on the softer side."

The economy was generally regarded as growing at a moderate or modest pace, before winter weather turned remarkably dicey. O'Sullivan says he believes the underlying trends remain respectable.

"I do not see any clear evidence, at least, that the trends are suddenly weakening. I think that is particularly true for the labor market," he says.

The hibernation effect

With many people deciding to stay inside the relative comfort of their homes, businesses including bars and restaurants, auto dealers and retailers in general are likely being hurt by the winter. "These sectors will weigh down overall spending growth in January," says chief economist Jeffrey Rosen.

Longer-term optimism?

The trade group National Retail Federation upgraded its outlook for retail sales just a few days ago. It predicts sales, excluding those at automobile sellers, gas stations and restaurants, to rise 4.1 percent this year.

One winner in the retail world will be in the online realm. The group predicts online sales this year to rise between 9 percent and 12 percent.

Putting the sting in your heating bill

At week's end, we'll get a reading on industrial production. That number, from the Federal Reserve, captures output by factories, mines and utilities. Who got the big benefit from winter's blast in that group? You guessed it -- utilities. Rosen says he looks for the report to show a spike in production at utilities during January.

Are consumers smiling?

Like the mercury in a thermometer, the University of Michigan's consumer sentiment gauge creeps up and down quite a bit. The separate reading from The Conference Board on consumer confidence rose for a second straight month in January. Of course, if consumers are more confident but not able or willing to spend, it doesn't matter a whole lot. When and if spring arrives, it will be interesting to see how warmly consumers feel about spending.

This week in business history

This week's trip back in time takes us to Riverdale. Feb. 11, 1942 brought the debut of Archie Comics. More than 2 billion Archie Comics have been sold over the years. The Archie characters are based in Riverdale. The franchise was responsible for spinning off Josie and the Pussycats and Sabrina the Teenage Witch -- which, in turn, spawned a long-running sitcom.

Follow me on Twitter: @Hamrickisms.

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