Economy Larger Factor than Weather

Feb. 11, 2014
Despite a firm belief that weather more greatly affects industries such as pool covers, yard tools, air conditioners and similar series, analysis of manufacturer, distributor and retail sales over decades reveals the economy is a significantly larger factor than the weather.

We have looked at manufacturer, distributor, and retail sales over decades and have found that the economy is a significantly larger factor than the weather. We have looked at pool covers, yard tools, air conditioners (central air and window units), and other similar series, and they all have a stronger relationship to the economy, despite the fact that many people feel it's the weather.

I bring this up because of the current talk about how weather has slowed automobile sales and how it will most likely bounce back with improved weather. First, what is the reality? The reality is that car sales in December were terrible in that the November to December increase was the mildest in 10 years. January Automobile Retail Sales came in 25.6% below December and the weather was again blamed for the off sales month. A closer look shows that a 25.6% decline in January is about average for the last 10 years and Automobile Retail Sales are doing fine -- not great, but okay.

On the surface the weather does not seem to be having a noticeably negative effect on Sales (e.g. higher heating bills have not kept people from buying cars in any meaningful way). Looking deeper, we find there is indeed something to be concerned about, but it is not the weather. The rates-of-change (the tool we use to see what the business-cycle pressure is on any given economy, industry, or company) are moving lower, and the annual moving total has stopped rising.

The rates-of-change are an economic tool that provides a view into the near-term, and they are signaling that the auto sales will be somewhat sluggish as we go forward regardless of the weather. If we connect the dots that means there is a good likelihood of an unwanted inventory buildup followed by a production troubles later this year.

It's not the weather, it's the slowdown in the US economy in the second half of 2014 that we said would begin with the consumer and then spread to other parts of the economy.

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!