"The excessive heat that enveloped much of North America during the last half of July has certainly caused a variety of short-term impacts for businesses and consumers. Companies that sell air conditioners, fans, cold beverages, swimwear and other similar products have benefited from a surge in demand. On the other hand, consumers looking to beat the heat scaled back on certain products, services and activities.
As the extreme heat subsides and more normal summer temperatures return, there are some longer-term, lasting effects that the recent weather will have on the economy.
August Electricity Bills = Higher Costs & Reduced Spending Power
Planalytics’ Power Weather Index (a measure that isolates the impact of temperatures on electric demand) is showing the following for the U.S. as a whole:
"Recent 'brown outs' in New York, Texas and parts of Midwest are evidence of how much the power grid struggled to keep pace with record demand for electricity as day after day air conditioners were working away at full blast," commented Paul Corby, Senior VP Planalytics Energy. "The cost of power hit all-time highs in the North East and Midwest and came close to highs in other parts of the country."
- +2% vs. July 2010 (Note: last year was the second warmest July in 50 years!)
- +6% vs. the 10-year average
- Many metropolitan areas in the Midwest & Northeast saw even larger increases during the last half of the month (St. Louis +16%, Chicago +14%, Cleveland +11%, Philadelphia +11% vs. the 10-year average)
Economic impacts for households and businesses include:
For many areas in the country, the heat wave lasted only a week or two, but in a difficult economy where consumer spending is already fragile, the ramifications of those 100 degree days will be longer lasting."...
- Significantly higher August utility bills will claim a greater share of household disposable income leaving fewer dollars to spend on dining out, back-to-school shopping, etc.
- For many, disposable income has already taken a hit with unplanned purchases of air conditioners and fans or repair/servicing costs for home and car air conditioners that malfunctioned under the strain of heavy use.
- Higher electricity bills will increase manufacturing costs for many businesses, putting upward pricing pressure on finished goods sold at retail.
Saturday, July 30, 2011
Profits and Losses from the July Heat Wave