Published on : Feb 07, 2014
In an interesting observation by Bank of America’s head of global rates and currencies David Woo, weather conditions have a bearing on financial markets in the United States. He says that the colder the weather, the slower is the economy of the country. Woo said that he found a correlation of 48% between the temperature patterns in the US over the last decade and first-quarter economic progress.
Woo calculated the month of January as being the coldest in the United States since the year 1988, and February being rather cold too, he says that the prognosis for growth isn’t all that optimistic. In the meanwhile, there were more snowstorms in the Northeast this week, and the weather bureau has predicted more to come.
According to Woo, this December has been the coldest since 2009, and it explains a parallel slowdown in the growth of employment levels.
Woo says he has found that over the last ten years, a 1 degree C drop below historically normal rates has resulted in the non-farm payrolls for that month being-on an average-below 38,000 of the forecasts.
His findings also reveal that with every 1 degree C drop in the temperature that occurs in the first quarter of the year, he also observes a 1.5% point decrease in the GDP growth since the year 2004. Woo explains that one of the reasons for this phenomenon could be that retail sales are sensitive to the changes in temperature in the months of January and February than they are in December as it is the month when people shop extensively for Christmas.
Woo writes that the current cold weather could thus prove to be a concern for the American economy.