What's the forecast? Study suggests average weather changes impact economy

The influence of routine weather changes can impact as much as 3.4 percent of the economy, including financial services, manufacturing and other sectors.
Written by Heather Clancy, Contributor
@ UCAR Photo: Carlye Calvin

It's pretty easy to imagine or extrapolate the catastrophic costs of an extreme weather event such as a hurricane, tornado or even a blizzard.

But even the most mundane, average weather patterns can be a drag across the entire economy not just the agricultural sector.

That's the initial finding of a new study led by the National Center for Atmospheric Research (NCAR). The influence of routine weather changes can impact as much as 3.4 percent of the economy, including financial services, manufacturing and other sectors. That's roughly $485 billion, if you use the 2008 gross domestic product (GDP) figures of $14.4 trillion.

Weather can have actual and psychological affects on the business world. In the Northeast, for example, retailers quake in terror when snow comes during the Thanksgiving weekend because fewer people go out and shop. Snowstorms could mess up tourism -- and the airlines -- like they did last year when a blizzard slammed the New York region the day after Christmas. Farms watch the weather closely, of course. In recent weeks, droughts in southwest Florida are the worst they have been in 80 years.

The intent of the research was to figure out whether it is worthwhile to invest in more accurate weather forecasting technologies, so that businesses can plan more specifically for average weather changes -- not just extreme events. The study was led by NCAR, along with researchers from the University of Colorado, Boulder; Lawrence Berkeley National Laboratory, and Stratus Consulting.

According to the data, the most sensitive sector to weather changes is mining, which makes sense because being under the ground when it is raining or in extreme heat poses human health and safety dangers. Up to 14 percent of the mining sector is sensitive to weather. Agriculture was second (12 percent of the sector), because produce and crops are obviously affected by temperature fluctuations the amount of precipitation that is anticipated. Here's how other sectors play out:

  • Manufacturing (8 percent)
  • Finance, insurance and retail (8 percent)
  • Utilities (7 percent)

The least-sensitive sectors when it comes to weather are:

  • Services (3 percent)
  • Wholesale trade (2 percent)
  • Retail trade (2 percent)

From a regional perspective, the most sensitive region appeared to be New York, and the least sensitive was Tennessee, according to the NCAR report. But the report suggests that state-level findings were more error-prone than the national research. The authors wrote:

"A key point here is that when aggregated across all 11 sectors, no one part of the country appears significantly more weather sensitive than another region in relative terms."

In the past two months, several technology companies have announced that they will apply their research and development activities to better weather predictions. For example, Intel plans to work with the National Center for Atmospheric Research on work related to better weather predictions — especially related to extreme events such as tornados or flash floods — and climate modeling. The plan calls for Intel contribute the Many Integrated Core (MIC) architecture toward projects that improve the availability and accuracy of information and that enable municipal governments to plan and respond to potential events.

Earth Networks (developer of the WeatherBug service) and EarthRisk Technologies (related to the Scripps Institution of Oceanography) have also announced a collaboration related to applying emerging technology to better water predictions. Their data will be offered as a service to businesses and municipalities seeking better insight into ongoing weather patterns.

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