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Economic indicators are simply not just numbers and graphs. Warren Buffett sites that his favorite indicator is watching the volume of freight train activity in his hometown of Omaha, Nebraska. Similarly, my favorite indicator is watching commercial trucking activity on I-95. Keeping this in mind, the winter’s snowstorms also offer indefinable economic indicators. There has been a lot of talk about the damaging impact of this winters severe weather conditions, however the potential positive impacts have not fully been discussed.
Over the last several weeks I have heard from a number of people who have stated that they have made extra income shoveling, cleaning roofs, plowing, etc. That got me thinking - where is that money going to go? Under-the-table income generated from the snowstorms will not be used for capital investments or savings; it will most likely be used for consumer spending. An immeasurable amount of cash liquidity has become available to a large number of individuals, and most likely all of that cash will be quickly redistributed to retail firms and utility providers.
Consumer spending has consistently been on the rise since June of 2009, and has been one of the driving elements of positive GDP growth. On the surface, a growth in consumerism seems to only have positive implications. However, increased consumer demand means an increased demand in imported goods. This is a problem in terms of our already suffering net export figures. But, growth is growth, and the trickle down effect of these snowstorms will likely boost Q1 GDP figures.
In addition to consumer spending, there will be an increase in small construction and municipal infrastructure contracts. There is literally billions of dollars worth of property damage caused by the storms nationwide. Ideally, it is not sound economics to rely on a catastrophe to stimulate economic growth, however there are instances when that is inevitable. Major output demands will be seen in construction, landscaping, road repair, and vehicular repair. These demands will not be significant enough to close our severe output gap of 9.0% unemployment, but they may at least get the ball rolling.