How Weather is Impacting Our Finances

Weather (Photo credit: Grizdave)

As weather is generally considered unpredictable, most financial experts do not factor this into their analyses. However, unpredictable or not, the weather does affect finances – both personal and national – in many ways.

Commodity Prices

The weather can affect commodity prices and the actual retail price that consumers pay for a variety of products. For instance drought or flooding can reduce the production of corn, increasing its price. This will, in turn, impact the price of bacon and chicken to a higher degree. A further consequence of this is the change in profit margins for fast food outlets such as the delicious Burger King and Taco Bell.

As such drought and flood in the corn growing areas will not only increase the cost of food but affect the profits of shareholders in fast food chains.

Similarly, when the winter is extremely cold, energy prices, especially that of oil goes up. This doubly affects the finances of households which have to pay more for the greater consumption of energy to heat their homes. This also affects the economy as the disposable income available for other purchases reduces, leading to a slowdown of the economy.

Extreme Weather Events

Environmentalists and others now point out that the U.S. has been experiencing a greater number of extreme weather incidents such as Hurricane Sandy. This too affects individual finances in multiple ways. With the number of such events increasing, more households are forced to obtain insurance cover for them. Moreover, insurance companies are likely to charge a higher premium as they anticipate more such events in the future.

Additionally, the federal and state governments are also involved in the rescue and cleanup operations. The governments also help in the rehabilitation of affected people and have to spend a lot of money to ensure that public infrastructure is usable as soon as possible. All of these expenses ultimately have to come from the general public in the form of taxes. This too will affect our finances in the future in a significant way.

Increased taxes and a greater out flow in insurance premiums also results in a lower disposable income at the hands of the consumer. This reduces spending on luxuries, entertainment, and other activities. As a result some industries experience a slowdown that affects jobs. While people in the service industries are likely to face increasing job insecurity, this can also lead to a lower consumer confidence level.

Loss of Productivity

Poor weather conditions such as heavy snow can also lead to loss of productivity. Individuals have to spend time shoveling snow and commute through snow filled roads. This can lead to late arrivals at offices and factories as well as work lost because of illnesses. Many of us will end up losing pay because of this. Those running small businesses or shops might see lower footfalls and a corresponding decline in sales and revenues as well.

But these weather conditions are good for four wheel drive vehicle sales, heavy coats, umbrellas, fire wood, natural gas for heat, boot makers, warm weather clothing manufactures, and so on.

Sunny Days

On the other hand plenty of sunny days, especially in seaside resort areas can lead to a boom in tourists and revenue for a whole host of businesses – large and small. Restaurant chains and specialty restaurants, those renting out small boats, hotels, and souvenir shops will also see an increase in traffic and higher revenues. Whether you own the restaurant or work in it, the greater number of tourists is likely to increase your income in terms of superior ticket sales and certainly more tips.

In general, poor weather conditions are bad not only for the general economy but individual finances as well because it reduces productivity and increases expenses toward maintenance and upkeep. On the other hand pleasant days and fantastic weather can increase economic activity and put more money in everybody’s wallet, for the most part but some businesses to quite well in the cold and turbulent weather.