American big freeze to cost US economy $5bn
Plunge in temperatures could cost US economy $5bn in lost revenue and shave the equivalent of 0.2pc off first quarter GDP.
The American big freeze has put an icy chill on business, as flights are cancelled and people cocoon themselves at home instead of going to the shops or to work.
The cold snap, which broke records as temperatures plunged below zero in all 50 states on Tuesday, could cost around $5bn, and shave the equivalent of 0.2pc a year off US GDP in the first quarter.
Evan Gold, senior vice president of Planalytics, a company which tracks weather for businesses, said that the cold snap would be short-lived, but that the cost would reach $5bn because of the sheer number of people affected.
"A similar situation in 2010 lasted a week, with back-to-back storms with snow and ice. We calculated that cost $25bn to $30bn. But that one lingered. This one is just very cold, so it should be a two- or three-day event,” he said.
Some 187m people in the Eastern two-thirds of the country faced extremely low temperatures on Tuesday, in what became dubbed the “polar vortex”. New York saw the mercury drop more than it has done in over a century, but the lowest temperature was reported at Embarrass, Minnesota, where the thermometer fell to -35F (-37C). Once the wind chill factor was taken into account, the temperature was as low as -45F (-43C).
Conditions are expected to return to normal towards the end of the week, but the freezing weather disrupted travel on Tuesday and Wednesday, as commuters were caught by icy roads, road closures and flight delays.
Some 2,380 US flights were cancelled and 2,912 delayed. Most of the delays were down to poor flying conditions but some planes were grounded fuel supplies were frozen.
Businesses saw footfall slow, as people stayed at home. Some stores, such as America’s abundance of frozen yoghurt chains, saw just a fraction of their usual trade, or shut up shop altogether. However, other businesses were buoyed by the cold snap. Warm weather gear sold out in many major stores, whilst other retailers increased their prices.
Shops, bars and restaurants are also braced for a drop in spending next month, as hundreds of millions of Americans are hit with higher energy bills. Mr Gold said that around 200m people could face “bill shock” for heating during the cold snap.
Over all, the polar vortex could shave up to 0.2pc off annualised GDP in the first quarter, analysts said. However, Nariman Behravesh, chief economist for HIS Global, said that any decline in GDP would “probably all be gained back in the second quarter.”