Polar Vortex and Business Preparedness – 5 Things to Watch

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EMPLOYEE ABSCENCES:

RETAIL SALES: Auto Sales effected last year, and Macy’s, Inc. closed 244 of the company’s 840 Macy’s and Bloomingdale’s locations at some point during the last Polar Vortex due to weather.

FROZEN HOUSING STARTS: Cold weather, especially in the Midwestern states, delayed the construction of many homes. Housing starts fell by over 30 percent in the Midwest this winter from 2013’s pace, in sharp contrast to the rest of the country where starts were up by 5.6 percent. While housing starts should rebound in spring, construction companies have had to cope with delays and waited longer to hire many of their seasonal workers.

LOGISTICS AND TRAVEL DISRUPTIONS: The logistics and travel industries experienced severe disruptions this winter. Airlines cancelled 6.5 percent of flights this January, up from 1.5 percent in January of 2013, losing an estimated $75 million to $150 million. The economic losses from delayed travelers may be far greater. Rail traffic also slowed significantly. One of the industry leaders, Union Pacific, reported that its trains ran 9 percent slower this March compared to the year prior. Businesses saw delays in deliveries, and some of the largest logistics companies reported that the winter interrupted their delivery systems. FedEx estimates operations costs were $70 million greater this year compared to a typical winter, and UPS reported similar winter expenses.

FOOD PRICES SPIKE: While most of the country was colder and snowier than normal, California continued to suffer from a three-year drought. The drought has especially hurt the agricultural sector. About 800,000 acres, or over 10 percent of the acreage of California, is expected to be idle as a result of the drought, causing $3.6 billion in crop losses. California grows 99 percent of the nation’s almonds, over 90 percent of the broccoli, 80 percent of the lettuce, and 90 percent of tomatoes. Prices for these products have already risen by double digits, and food prices could continue to rise through the summer.

UTILITY COSTS: Natural gas prices for commercial and industrial businesses were over 20 percent higher in March of 2014 compared to the same month in 2013. Businesses and households used more energy for heating, which not only led to larger bills but also to higher prices. Weather-related disruptions to the delivery networks of natural gas, particularly in North Dakota’s Bakken region, also increased energy costs.

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