Winter Storm Stella could lead to 0.2% GDP drop in Q1

Dive Brief:

  • Winter Storm Stella could be highly expensive for first-quarter 2017, CBS News reported Tuesday. Due to the region it struck as well as the mid-week point, estimates put it at a potential 0.2% reduction in the GDP. 
  • Big storms demand lengthy recoveries, with plows and shovels often working throughout the business day and into the evening. Conversely, an unseasonably warm January and February may have influenced the strong economic figures of the past months. 
  • Earnings lost due to closings and transport issues cannot be recouped, leaving airlines, manufacturers and retailers short a day of revenues. Over 6,000 flights were canceled during the storm.

Dive Insight:

Winter storms are alarming for many reasons: inconvenience, accidents, excessive snow and cold, the impact on the frail and elderly. For supply chain managers, however, it is the economic impact that hurts most frequently.

Estimates of recent storm recovery costs in New York City put the total at somewhere around $500 million. This includes the price of snow removal, the funds lost from parking lots and unenforceable street parking illegalities, bus and train shutdowns, and the value of work performed that could not be replicated from home offices.

These direct costs do not account for the indirect value lost from manufacturing and transportation delays, however. In order to ensure employee safety, production facilities will often close in advance. Ports, too, may delay pickups and deliveries depending on snow accumulation. Four ports in the U.S. Northeast reported some sort of delay or closure, and many roads and highway were closed off Tuesday and Wednesday.

Considering the affected regions were logistics hubs like Pennsylvania and New Jersey, backlogs likely pervaded the supply chain. Fortunately, supply chains and logistics providers are used to weather delays, although not always in March. Safety stocks exist for this reason, and proper planning can help avoid full disruptions later. Nonetheless, various days of stalled production in one of the most dense regions of the U.S. has its economic repercussions (if short-term).

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Filed Under: Logistics
Top image credit: Flickr; Ruthanne Reid