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Experts' hopes are up for sunnier US economy once winter fades

Severe winter weather is probably slowing growth again this quarter. But as the chill and snow fade into memory, long-delayed spending by consumers and businesses could invigorate the economy starting in spring.
Published: March 1, 2014
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When the weather warms up, so, too, will the U.S. economy.

That, at least, is the prevailing view of economists, who shrugged off a government report Friday that the economy was weaker last quarter than first thought.

Severe winter weather is probably slowing growth again this quarter. But as the chill and snow fade into memory, long-delayed spending by consumers and businesses could invigorate the economy in spring.

“We will likely see a boost from pent-up demand in coming weeks,” said Doug Handler, chief economist at IHS Global Insight.

In the view of most analysts, the snowstorms and extreme cold have exerted a harmful but only temporary effect on the economy.

That helps explain why Federal Reserve Chairman Janet Yellen signaled this week that the Fed likely will continue reducing its stimulus for the economy throughout 2014.

The Commerce Department said Friday that the economy grew at a 2.4 percent annual rate last quarter, in part because consumers didn’t spend as much as first expected.

One reason the government initially overestimated growth for last quarter was that it didn’t fully take account of how much bad weather would dampen spending on long-lasting goods such as autos.

Economists had long expected growth to slow in the final quarter of 2013 and the first quarter this year compared with the third quarter of last year.

In part, that’s because GDP growth during last year’s third quarter was fueled by an unsustainable buildup in company stockpiles that would need to be worked down.

But analysts said the slowdown has been magnified by a succession of winter storms that have disrupted economic activity — from forcing temporary closings of Macy’s and other department stores to poor sales at McDonald’s restaurants.

Home Depot Inc. said it lost $100 million from weather in January.

The damage from consumer spending has been especially acute because it accounts for about 70 percent of economic activity. Economists foresee further spending weakness this quarter.

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