By Stephanie Reid
The United States is currently experiencing what’s
known as an El Niño weather pattern, which experts predict will last well into
spring. When we think of El Niño, we often conjure up images of unpredictable
weather, like 60-degree Christmases or unrelenting Southwest rains.
However, there is more to the story than incongruous
forecasts: El Niño weather events also generate a significant economic impact
worldwide. From surges in umbrella purchases to the abrupt sale of a ski
resort, El Niño’s fiscal impact can be more random than a rain shower in
Phoenix.
What exactly is El Niño?
The term “El Niño” refers to the Christ Child in
Spanish, and was originally coined in the 1600s by fishermen working off the coast of South America.
Generally, El Niños occur due to temporary and periodic warming of sea surface
temperatures in the equatorial Pacific, an area spanning thousands of miles
into the central Pacific Ocean.
Based on weather data, the phenomenon occurs every two
to seven years and creates any of the following weather patterns in the United
States:
- Increased rain activity
in the southern part of the country, from California to the Carolinas
- Notable dryness in the Ohio
Valley, Great Lakes, Pacific Northwest, and Northern Rockies
- Cooler average
temperatures around the Gulf of Mexico and in the Southern Plains and
Desert Southwest
- Warmer average
temperatures across the Northeast, Pacific Northwest, and Northern Plains
Good for business…
There are a number of businesses thanking their lucky
stars for the onset of El Niño this year, as the unusual weather patterns invariably cause unusual
commercial spending habits. For instance, pest-control company Orkin, Inc.
reports a higher than average number of service calls concerning mosquitos,
ants, and flies, particularly in areas not usually prone to pest activity in
winter months.
Similarly, outdoor restaurants—which typically batten
down the hatches by Labor Day—are seeing an extended period of warmer weather,
allowing for increased sales and greater profits than in typical years.
….and, not so good
On a more macro level, El Niño presents a significant impact on
agricultural trends, especially within the highly volatile commodities markets. According
to experts, El Niño disruptions to livestock, crops, and other important
commodities can cost the global economy billions of dollars. Moreover, it can
take several years for producers to fully recover, just in time to do it again.
According to a climate-change specialist associated
with the Asian Development Bank, “[t]he impact is likely to be high, affecting
energy, food and water in many parts of Asia…” This will, in turn, impact food
and energy prices in the United States. In 1998, El Niño is estimated to have caused
nearly $45 billion in losses to the global agriculture market, particularly in
the following areas:
- Changes in water
temperatures lead to fish migration, making traditional catches difficult
or impossible
- Diminished
poultry and livestock feed
- Loss of crops due to
heavy rains
- Sharp
increases in grain prices
Aside from agriculture, American industries dependent
on sub-freezing winter weather face difficulties from El Niño. According to one
ski industry expert, resorts in Vermont, West Virginia, and Ontario are seeing
unprecedented warm winter temperatures, making snow production difficult.
Overall, the global economic impact of the current El
Niño has yet to be fully measured, as the oceanic temperatures are expected to
remain warmer than usual for the next several months. During that time, it will
be interesting to note how global economies react to the dramatic shift in
weather patterns, and if areas like the Pacific Northwest or New England truly
experience warmer, wetter winters.
At the micro economic level, smart small businesses
will want to evaluate the effects of this year’s El Niño on their bottom
line—good or bad—and plan accordingly for the next time this weather phenomenon comes around.
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