Last year's unusually harsh U.S. winter probably had some transitory effects on economic activity, but the "folk wisdom" that it was primarily to blame for the slump in early 2014 is suspect, a pair of researchers at the Chicago Federal Reserve said on Wednesday.
The theme of harsh weather holding back economic growth is back again this year, with many states registering even colder temperatures than last winter.
The U.S. economy shrank at a 2.9 percent annual pace in the first quarter of 2014, and economists pinned much of the contraction, the sharpest in five years, on bad weather.
But a careful look at weather patterns and economic activity shows that "something more than the weather was at play," wrote economists Justin Bloesch and François Gourio in the bank's latest quarterly Economic Perspectives. "Even the fairly bad weather during the 2013-14 winter cannot account entirely for the weak economy during that period."
Other factors that may have contributed to the slowdown were inventory corrections and the effect of foreign trade, they wrote.
Gourio, in an interview, said the paper is one step toward a goal of developing "weather-adjusted" statistics, similar to the seasonal adjustments made on government data that make it easier to distinguish underlying trends in retail sales, say, from seasonal ups and downs.
For monetary policy, disentangling how much of a given slowdown is weather-related and how much is due to underlying factors that could be offset with easier monetary policy would be useful.
In early 2014, the researchers wrote, policymakers guessed that weather was a big factor in the slowdown and did not alter their policy in response. In retrospect, Gourio said, people did a pretty good job of figuring out in real time that weather was a factor, but even today it is uncertain exactly how much of an effect it had.
Applying the research to this past winter's weather patterns is no simple task, Gourio said, and the paper did not attempt to do so.
But Gourio added that at some point he hopes to publish such an analysis.