- The Washington Times - Wednesday, February 19, 2003

The biggest snowstorm in years delivered another blow to consumers and will further weaken the economy, analysts said yesterday.
The combination of cold weather and worries about war with Iraq pushed crude-oil prices to almost $37 a barrel in New York trading yesterday barely $4 below their peak during the 1990-91 Persian Gulf war. That means consumers will get hit with a fourth straight month of high home-heating bills, in another wallop to their wallets.
"This bad weather is a double whammy" for consumers and businesses, said Sung Won Sohn, chief economist with Wells Fargo & Co., because it raises the cost of ordinary activities like heating and driving, while cutting the incomes of those who were unable to work or open for business because of the storm.
Because the storm hit the nation's most populous region in the Northeast, shutting down businesses and stranding people in their houses or at airports for days, Mr. Sohn said, it could do as much damage to the economy as a natural disaster like Hurricane Andrew.
The estimated damage from that major hurricane was in the tens of billions of dollars. Mr. Sohn said the economic damage from the snowstorm is even more widespread because it hit a wider region and because many of the costs such as higher heating bills and missed work days will not be reimbursed by insurance companies.
State and local snow-removal teams are working overtime to reopen roads and enable people to get back to work, generating some increased economic activity. But that is not enough to offset the losses to retailers and consumers, Mr. Sohn said.
Meanwhile, the increased costs for state and local governments soon will passed on to consumers in the form of higher tax bills and fees, further cutting into their purchasing power, he said.
"It's a major burden on the overall economy," he said. "It's unfortunate it comes on the heels of all the other problems. Things do tend to bunch up when they go wrong."
The cold temperatures and high energy prices weigh on consumers' spirits as much as their pocketbooks, analysts say. Consumer confidence recently hit a 10-year low partly because of high energy prices and the tepid economy associated with them.
"Higher gasoline prices are clearly taking a toll on already jittery consumers," said John E. Silvia, chief economist with Wachovia Securities. He estimates that the bite from high energy bills will lead to a rare decline in inflation-adjusted consumer spending this spring.
The higher energy prices force consumers to cut back spending in other areas, particularly on discretionary items, such as entertainment and dining out.
Those businesses also are among the ones that suffered the biggest blow from the snowstorm. Chains like Macy's and J.C. Penney closed hundreds of stores on the East Coast at a time when they had been planning big Presidents Day sales. Many of the stores saw only a trickle of customers when they did finally open, despite big-money advertising campaigns.
"There's not much they can do to recapture" the lost sales, said analyst David Abella of Rochdale Investment Management. "For some stores, it's a big sale and it's a very important day."
Sales already were tepid at the big chains. May Department Stores Co., the owner of Hecht's, Filene's, Lord & Taylor and Strawbridge's, said it shuttered 100 of its 443 stores on Monday, Presidents Day.
J.C. Penney said it closed about 270 of its department stores. Macy's, a unit of Federated Department Stores Inc., shut almost all stores north of Virginia. Penney and some of the other stores have extended their Presidents Day sales until this weekend to try to make up for lost business.
Mr. Sohn and other analysts estimate that economic growth will be 2 percent or lower in the current quarter, partly as a result of the storm and its impact on consumers.
Despite the damage to the economy, Wall Street appeared to mostly shrug off the storm yesterday. Stocks staged a rally partly out of relief that it was a snowstorm and not a terrorist attack that ground business to a halt over the long weekend.
Stocks had dropped last week on fears of another attack on New York and Washington, raised by the heightened Code Orange alert announced by the government. But yesterday investors concluded that the likelihood of attack was declining, helping spur a 132-point jump in the Dow Jones Industrial Average.


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