Heavier than normal snowfalls and Arctic temperatures in the Midwest, East Coast and other parts of the country have made Winter 2014 one of the worst in decades. But what effect will all the harsh winter weather have on productivity?
Plenty, says at least one manufacturing industry analyst.
Bradley Holcomb, chair of the Institute for Supply Management’s business survey committee, said slower than expected growth in the Purchasing Managers Index (PMI) could be a result of business closures, supply chain interruptions and other effects caused by the bad weather.
January’s PMI, which the ISM uses to measure the health of the nation’s manufacturing, fell 5.2% in January, which is 2.5% below the average for the previous 12 months and the lowest reading since May, 2013.
“Manufacturing is still growing,” Holcomb said. “The PMI decline caught people off guard, but if you look beyond the numbers and into the respondent comments, for example, a number of panelists cited poor weather conditions as a contributor to issues with new orders and inventories coupled with some companies just being closed for weather-related reasons. There is some impact there as this was the coldest January for a couple of decades.”
January Down But Economy Not Out
Holcomb noted, however, that the PMI was still above the 50 benchmark which indicates strong economic activity and it has been for 13 of the past 15 months. He also said the overall economy has been growing for the past 56 consecutive months.
The January figures represent only one month’s data and when coupled with long-term PMI, there is less cause for concern.
The impact of January’s chilly and snowy weather has been felt from coast to coast. In Atlanta, highways were shut down and commuters were paralyzed after two inches of snow fell during that city’s busy rush hour. Not accustomed to snow, Atlanta has almost no snow removal equipment and drivers were unaccustomed to driving in the wet, slippery snow.
Thousands passenger and cargo flights have been cancelled at busy airports up and down the East Coast due to high winds, heavy snow and sub-zero temperatures.
Wintry Weather Disrupts Supply Chain
In the Midwest, fast-falling snow caused interstates in Indiana and other states to be temporarily shut down to all traffic as cars spun out into ditches, semi-tractor trailers jack-knifed and police dealt with countless accidents, both minor and serious.
Yet weather may not be the only thing hampering manufacturing growth, according to Lindsey Piegza, chief economist at the consulting firm Sterne Agee. The smaller than expected growth PMI could indicate more serious underlying problems in the overall economy.
“While still positive, manufacturing activity has been losing underlying momentum over the past couple of months, suggesting a muted contribution to growth at least in the near term while global and domestic demand continue to recover at an uneven pace,” Piegza wrote in the ISM’s report. “Global manufacturing overall activity has been mixed with a juxtaposition of strength and weakness across Eurozone economies and Chinese manufacturing declining to a six-month low. In the US, extreme weather is thought to have at least in part contributed to a slowdown in production, already heightening expectations for a rebound next month.”
Don’t count on it, says Punxsutawney Phil. Pennsylvantia’s prognosticating groundhog saw his shadow on Groundhog Day, Feb. 2, predicting six more weeks of winter!