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New BEA Data Provide Insights on How Harsh Winter Impacted Industries in First Quarter

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Real value added —a measure of an industry’s contribution to GDP—for agriculture, forestry, fishing, and hunting declined 31 percent in the first quarter, reflecting a drop in the production of farm-type products, including livestock and dairy.

How much did the harsh winter weather affect the U.S. economy in the first quarter of this year?

We know that the economy, as measured by gross domestic product (GDP), contracted at an annual rate of 2.9 percent over January, February and March, the first quarterly decline in three years. But how were different industries affected and was weather a factor?  New data released today by the U.S. Bureau of Economic Analysis provide fresh insights on that front.

The economy’s downturn in the first quarter was widespread, with 19 of 22 major industry groups contributing to the drop in U.S. economic activity, the new BEA data show.  Some of the leading contributors to the downturn included industries that were impacted by the unusually harsh winter weather that hit most of the United States, including “agriculture, forestry, fishing, and hunting.”

Severe weather conditions can have both positive and negative (although mostly negative) effects on the Nation’s economic performance. For some industries this is intuitive, like “agriculture, forestry, fishing, and hunting” and “construction;” for other industries, like “mining,” and “nondurable-goods manufacturing,” the link may not be as intuitive.

Real value added —a measure of an industry’s contribution to GDP—for agriculture, forestry, fishing, and hunting declined 31 percent in the first quarter, reflecting a drop in the production of farm-type products, including livestock and dairy. 

Construction fell almost 9 percent, reflecting a notable decline in nonresidential construction activity that began in January and continued through March; unusually cold and wet weather hampered construction activity. 

Perhaps somewhat surprising, the utility industry also contributed to the decline in GDP in the first quarter.  While demand for additional utilities, for example electricity generation, was evident with the severe winter weather, a surge in the costs of the inputs used by the utilities industry—things like energy, materials, and purchased services used in the production process—caused real value added to drop over 16 percent in the first quarter. 

Real value added for mining fell 5.6 percent, driven in part by the weather.  As with utilities, inputs played a critical role.  Part of the increase in input costs in mining reflected increased demand for natural gas that was used to prevent ‘wellhead freeze-offs,’ of which the likelihood increases as temperatures fall.

As noted, the abnormally harsh weather did not have a negative impact on all industries.  For example, consumer spending data released with the “third” GDP estimate on June 25th revealed that  real household consumption of fuel oils increased in the first quarter, which is reflected in the growth for nondurable goods manufacturing, which includes the petroleum refining industry (nondurable goods manufacturing was up 15 percent).

In the first quarter of 2014 the weather—given the unusually harsh conditions—had a more significant impact than normal on U.S. economic activity.  For some industries, the weather linkages are more apparent than in others.  Yet even in these industries, it is not possible to explicitly identify impacts on the U.S. economy and industry performance from the weather.  Still, many of the examples above illustrate the important features that the GDP by industry framework provides, enabling complete industry analysis on the sources of U.S. economic activity, including supply chain analysis.

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