February’s Beige Book allows one clear conclusion: bad weather is slowing the US economy. The Fed’s chairwoman, Janet Yellen, raised the idea two weeks ago at her first testimony in Congress. February’s sluggish job reports confirmed her point.
The Beige Book’s conclusion is, however, more entertaining, at least if it is seen from the perspective of where the most powerful central bank in the world gets inspiration for taking conclusions. One example: a 40 percent drop in sales in a Philadelphia’s mall during St. Valentine’s weekend announces bad data for consumption in the US Northeast. Same with a car dealer in West Virginia that reported one day 18 inches of snow; as a result, the following day only one prospective buyer showed up at the place.
All these cases are reflected in this month’s Beige Book. It sounds anecdotal, and perhaps it is, although sometimes it can be surprisingly accurate. One of the first signs of the Great Recession came from a store that reported a drop I the sales of six-pack beer proved not only that the economy was slowing, but that construction workers were being laid off.
This time, the Beige Book predicts low economic growth due to an inclement weather that has fallen over the East, the Center and the Southeast of the United States. So far, the city of New York has received more snow that Anchorage, in Alaska, and that has taken its toll on growth. In theory, this should trigger a recovery in the summer.
Recovery in the summer, why not in spring? Maybe the weather is going to be horrible?
The Fed does not get into meteorology but, as the Beige Book points out, too many school days lost due to the snow mean less holidays in the spring and, therefore, less consumption.