— This is the script of CNBC's news report for China's CCTV on January 14, 2018, Monday.
With this heavy storm casting shadow over many regions, economy loss made by heavy weather also draws attention from markets. First, let's have a look of these 2 concepts: how much economy loss can extreme weather cause? National Center for Climate Research concluded in 2018 after doing research on the relations of weather and economy in past 70 years that:
Extreme weather costs U.S from $245billion to$725billion per year and worse case is it may even drag on GDP at 3.4%
Among that, snowstorm causes billions of loss to economy each year, despite casualties, power outages, and flight cancellations,
The most harmful thing is a decline in capacity of the whole economy and a soar in cost of local and federal government. People are stuck at home, construction sites set idle, plants cant complete orders, pushing manufacturing data jump. The manufacturing data of Jan has not released yet, but let's make an example via that in Jan 2014.
Then we can see the manufacturing reading slide to 51.3, which is a far cry from 56 expected, after going through Jan with frequent snowstorm. Meanwhile, heavy weather also impact retail industry severely, for instance, Jan auto sales in U.S. were off 3% in 2014, and that for Ford plummeted 14%. As for employment, positions contributed by private sector were just 175000 in Jan 2014, below 193000 expected.
Additionally, cost for snow removal and repair of damaged facilities is also expensive to local government, driving fiscal expenditure up. From 2014 to 2015, Buffalo, New York, cost $9 million for snow removal. And this year, because U.S government shutdown, some public-sector workers are being furloughed, unexcused absences in the transportation sector have skyrocketed, so this snowstorm really comes in an unwanted time.
Unexcused absences in transportations sector rise to 7.7%, more than double what it was a year ago. The direct result of this is the efficiency of snow removal and other work is greatly reduced, resulting in economic losses and increased probability of accidents.
Finally, financial markets, usually for stocks and commodity assets that related to snowstorm, investors put close eyes on retailers' performance.
If weather is bad, brick-and-mortar stores are not selling well, e-commerce delivery will also be delayed, weighting the whole retail industry down and resulting in a jump in shares. But that doesn't rule out people rushing to snap up necessities, such as food, water and battery so on, fueling local shops' turnover and make a temporary push.
Secondly, on commodity assets front, natural gas is sensitive to weather change, because cooling will boost demand for natural gas, sending prices soaring
U.S. natural gas futures for February delivery surged more than 7. 7% this morning, which is a notable gain, as for the final economy impact to U.S., we have to wait for economy data being published. However, due to the government shutdown, the release of these economic data may also be delayed. We will keep an eye on this issue.