Annual cost of weather may total $485 billion in U.S.

A new study applies economic analysis to estimate the weather sensitivity of the entire U.S. economy.

Routine weather events, such as rain and cooler-than-average days, can add up to an annual economic impact of as much as $485 billion in the United States, according to new research led by scientists at the National Center for Atmospheric Research (NCAR).

The study found that finance, manufacturing, agriculture and every other sector of the economy is sensitive to changes in the weather. The impacts can be felt in every state.

New Mexico’s Last Chance fire. Wind-driven wildfires char forests – and nearby human dwellings. Image Credit: U.S. Forest Service

Sarah Ruth is a program director in NSF’s Division of Atmospheric and Geospace Sciences. She said:

From wind-driven wildfires, to the timeliness of airplane take-offs and landings, to peak demand for electricity in a hot summer, weather affects every aspect of our lives – and our economy. This research shows that a substantial percentage of the U.S. economy is linked to variability in weather.

This is the first study to apply quantitative economic analysis to estimate the weather sensitivity of the entire U.S. economy.

NCAR scientist Jeff Lazo is the paper’s lead author. He said:

It’s clear that our economy isn’t weatherproof. Even routine changes in the weather can add up to substantial impacts on the U.S. economy.

The research could help policymakers determine whether it is worthwhile to invest in enhanced forecasts and other strategies that could better protect economic activity from weather impacts.

Summer thunderstorms may knock out electricity for thousands and ground airplanes in wide areas. Image Credit: NOAA

The authors caution that the study should be viewed as an initial estimate, which they plan to refine in subsequent research.

Lazo and his colleagues did not calculate additional costs associated with extreme weather events, such as this year’s tornado outbreaks, since data on extreme events were not available for the time period covered by their economic model. Nor did they evaluate the possible impacts of climate change, which is expected to lead to more flooding, heat waves, and other costly weather events.

Still, the study concludes that the influence of routine weather variations on the economy is as much as 3.4 percent of U.S. gross domestic product.

Weather can affect both demand and supply of various sectors, with complex and sometimes contradictory influences on the overall economy.

A snowstorm, for example, may disrupt air travel and drive up heating costs while boosting subsequent attendance at ski resorts. A prolonged dry spell can affect supplies of crops while enabling construction projects to remain on schedule.

Previous studies looked at weather influences on particular economic sectors or produced subjective estimates of overall weather impacts. In contrast, Lazo and his colleagues combined historical economic data with economic modeling techniques. This enabled them to produce a detailed analysis of the U.S. economy’s sensitivity to temperature and precipitation.

The results indicate that the mining and agriculture sectors are particularly sensitive. Routine variations in weather may take a toll on the mining economy of 14 percent each year, perhaps because of changing demand for oil, gas and coal.

Agriculture ranked second at 12 percent, conceivably because of the many crops that are affected by temperature and precipitation.

Other sensitive sectors include manufacturing at 8 percent; finance, insurance and retail at 8 percent; and utilities at 7 percent.

In contrast, wholesale trade at 2 percent, retail trade at 2 percent and services at 3 percent were found to be least sensitive.

The results, published with co-authors from the University of Colorado at Boulder, Lawrence Berkeley National Laboratory and Stratus Consulting, appear in this month’s issue of the Bulletin of the American Meteorological Society.

The research was supported by the National Science Foundation (NSF), which is NCAR’s sponsor, and by the National Oceanic and Atmospheric Administration.

Bottom line: A new study applies economic analysis to estimate the weather sensitivity of the entire U.S. economy. Routine weather events, such as rain and cooler-than-average days, can add up to an annual economic impact of as much as $485 billion in the United States, according to the study. The study also found that finance, manufacturing, agriculture and every other sector of the economy is sensitive to changes in the weather. The impacts can be felt in every state.

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