How does weather variability affect our economy?

Weather has a big impact on our economy at all levels — local, state and national. In our local economy, weather influences various business decisions, such as when to plant or harvest, when to pour concrete or shingle a roof in construction projects, or in predicting peak demand for electricity or gas for home heating.

Weather impacts can be complicated and affect various sectors of the economy in different ways. For example, a snowstorm may disrupt the economy negatively by driving up heating and snow removal costs, while boosting the economy through increased attendance at ski and snowmobile resorts. A prolonged dry spell can negatively affect agriculture while having a positive impact on construction projects by helping them to remain on schedule. Weather also affects the economy by impacting both supply and demand for the products and services of a particular industry. For example, consider the ice fishing industry where a good season is determined by the total days of ice on our lakes. A warm winter thus has a negative impact on that sector of the economy by reducing the supply of good lake ice.

A recent study by the National Center for Atmospheric Research explored the economy’s weather sensitivity, using weather variability as a factor affecting our gross domestic product. The study concluded that the impact of routine weather events on the U.S. annual economy is 3.4 percent of U.S. gross domestic product — or about $485 billion (in 2008 dollars) for the 2008 U.S. economy! Overall, precipitation variations had a larger effect on the economy than temperature.

Category: Meteorology
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