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Monday, February 19, 2007

Kellner: Blame it on the Weather

by Calculated Risk on 2/19/2007 11:09:00 PM

From MarketWatch: It's the weather, stupid

No, Virginia, the economy did not suddenly step into a hole in the past month. Rather, it simply got stuck in a humongous pile of snow.

There's no getting around it: The past week's slew of economic data was far from what the pundits expected. ... On the surface these developments look ominous. ...

Before you push the panic button, let me remind you that January is a notoriously bad month on which to base conclusions regarding the state of the economy. This is because it tends to be a cold, snowy month in most parts of the country, thus curtailing a wide range of economic activity, from shopping to homebuilding.

True, government statisticians adjust for these regularly-recurring declines, but when the weather is unusually rough, these seasonal adjustments cannot fully ameliorate the effects of the weather and the reported numbers take a dive.

This is what happened in the past month. Snow measured in feet rather than inches kept people out of stores and prevented them from going to work, whether to their factories or to the jobsite.
This article makes a good point - one month does not make a trend, especially when the weather is unusually bad (or good).