Economic Outlook: Economy Warming Up
April 6, 2012 by UPI - United Press International, Inc.
Occasionally, Mother Nature gives the economy a boost.
Throughout the winter, in weekly report after weekly report, the International Council of Shopping Centers took note of the unseasonably warm winter that was not just warmer than last year, it was often hugely warmer than last year.
Frequently, temperatures were noted as “unseen in the past 20 years” or more. Climatologists at the University of Alabama, Huntsville, said March was the warmest on record in the 48 contiguous states.
How unusual was it? It was so off the tracks that the most unseasonably warm spot on the globe in March was northeastern Iowa. That’s not because it was the hottest place on the planet, but it was the most out of whack, averaging 11.2 degrees Fahrenheit above normal.
Alas, that doesn’t make it a great place for March water skiing but it is a distinction, nonetheless.
What is this doing economically? Plenty, it turns out.
Retailers reported March was an unseasonably brisk month, especially for apparel stores, where spring fashions were in vogue early enough so that stores were not using discounts to make sales.
Normally, if the winter remains unduly cold, spring clothing sits on the shelf and stays there until summer items come along and force retailers to discount their spring offerings. This year, retailers are getting full price for their spring lineup.
Obviously, heating a home has not been as expensive as usual. Not only are home heating systems working fewer hours, the cutback has created a backlog of supply, pulling down the price of natural gas futures.
If it is 50 degrees outside when it is normally 30 degrees, heating bills will shrink. By forcing a glut in supply, however, next year’s energy bills could also shrink, because future contracts are less expensive now.
The same applies to jet fuel and gasoline that goes in the car. If there was a red line across the United States similar to the visual aids used during football game broadcasts, the “tourism belt” this year will move slightly north. “Let’s go someplace warm” still isn’t northeaster Iowa. But it might be North Carolina this year instead of South Carolina — just to make a point.
Gas and oil prices are rising, because they are affected by more than just weather. Suffice it to say, if it had been a cold winter rising energy prices would have only risen further.
Restaurant owners are enjoying the warm weather, MarketWatch reported. For the first quarter of the year, stocks at Buffalo Wild Wings rose 34 percent while steakhouse Ruth’s Hospitality Group stock rose 53 percent.
“In our view, the primary driver of the industry sales acceleration this winter was likely unusually calm weather,” wrote Raymond James analyst Bryan Elliott in a research note.
Anything farm connected — tractors, combines, work gloves, seed, fertilizer products — will have an early and possibly prolonged season. Moreover, commodities are sharply affected, which means most items in the grocery store will reflect the warm weather one way or another.
The unseasonable weather has tempted some farmers to put corn in the ground earlier than usual, which puts the young plants at risk of a late frost. Fruit trees and winter wheat can also be caught by a late freeze if they started to blossom early, although so far no major setbacks have been reported this year.
An early planting season allows farmers to turn more acreage into corn production. Farmers will then cut back on soybeans — used as a default crop when acreage is disrupted.
Farmers plan on growing some soybeans as a backup plan – Plan B. This year, weather permitting, they will have less need for Plan B. So soybean prices will likely rise. China the largest buyer of soybeans, will, therefore, pay a bigger bill for the soybeans it buys.
Moral of the story: An early spring not only affects the trade winds, it affects the balance of trade as well.
In international markets Friday, the Nikkei 225 index in Japan fell 0.81 percent and the Shanghai composite index in China rose 0.19 percent. The Hang Seng index in Hong Kong dropped 0.95 percent and the Sensex in India fell 0.63 percent.