After seeing a recovery in the economy since the middle of 2013, experts say retail sales in December and January have partly dropped due to the winter weather. A report from the Commerce Department showed January sales have dropped by 0.4 percent. December showed a drop of 0.1 percent.
Some experts blame the drop in retail sales on the winter storms, which have been affecting many parts of the country in December and January, but others say this cannot be the only reason for the drop. “It is too easy to say that the winter storms were the cause of the pullback in the last month as the declining trend was already predicted in the months before that,” says Lindsey Piegza, chief economist at Sterne Agree. Like Piegza, several economists have predicted that economic growth would drop slightly at the beginning of 2014 as businesses whittled down their inventories. In addition, the report from the Commerce Department showed that online sales have fallen in the past two months as well which, unlike retail stores, should be less affected by winter storms. Piegza; however, might have an explanation after all. She explains, “Although retail sales may not have dropped solely due to the winter weather, it might have partly played a role. With the cold weather in the country, people will spend more money on their heating bills. My estimation is that households will spend $600 to $1,000 more on heating this winter.”
Diane Swonk, chief economist at Mesirow Financial, is certain that retail sales have partly dropped due to the winter weather. She says, “The weather has disrupted incomes for many people, simply because they were not being able to get to work and some employers closed their business due to the snow. It is unlikely that these workers will be able to recoup their loss this year.” Swonk estimates that the economic growth will be disappointing in the first three months of this year, but she is hopeful. “Slowdowns because of the weather will usually recover during warmer months,” she explains.
No matter what the experts predict, retailers are keeping their fingers crossed for better days. President Steve Weil of Rockmount Ranch Wear is concerned and nervous. “I have no doubt that the winter storms affected sales in my store. At the moment I have no reason to believe that there is going to be a growth in the near future,” Weil says. In addition, he says he has seen fewer tourists in his store in the past years.
Plananalytics Inc. recently analyzed the effects of the winter storms. Evan Gold, senior vice president, reveals, “The weather conditions have cost the country $15 billion so far, mainly due to the fact that workers were not able to show up at work, but we do think the overall effect will be relatively small. We should not forget that the U.S. economy is worth $16 trillion.”
Paul Grangaard, chief executive of a Wisconsin-based luxury shoemaker, says, “Our retail sales have also dropped, but it looks like consumers are taking a break of shopping, partly due to the severe winter weather. I do expect retail sales to pick up once spring comes.”
By Diana Herst