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5 Examples of How Economies are Inextricably Linked to Weather

Economics and weather have always been closely linked. Since ancient times, people’s behaviour has been significantly impacted by climate and weather. Tribes, for example, may migrate due to drought, flooding or other severe weather conditions. Modern industrial societies are not immune to this influence either. Let’s look at some examples of how weather can affect the economy.

1. Rain Can Harm Retail Sales

It’s a simple fact of life that people don’t venture outside any more than necessary when the weather is unpleasant. That’s why conditions such as persistent rain can have a damaging effect on retail sales. During periods of heavy rain, people will tend to only make purchases that are absolutely necessary. It’s typical for retail sales to fall when rainfall is higher than average.

2. Cold Temperatures and Snow Slow Freeze the Economy

Snow and freezing temperatures can have an even more devastating impact on the economy than rain. This is particularly true in places that aren’t accustomed to snow, such as the UK. In the Winter of 2013, for example, there was widespread snow and very cold temperatures. As a result, the economy in many regions actually shrank. This was due to a variety of weather-related factors, such as travel plans being disrupted and people simply not wanting to go outside. Research showed that a particularly harsh wintry blast last year cost the UK economy £500 million per day.

3. How Weather Affects Tourism

The entire travel industry is extremely dependent on the weather. This can work both ways. If weather conditions are particularly severe, people may be unable to travel at all. On the other hand, long periods of inclement weather can motivate people to escape to more temperate climates. Last spring, for example, many parts of the UK were experiencing snow and lower than normal temperatures. While, as already mentioned, this was harmful to the economy in many ways, it also gave many people the incentive to leave for warmer places. This was a boon for anyone selling travel packages, not to mention the countries to where the tourists fled.

4. The Devastating Impact of Flooding

Floods can be one of the most harmful types of natural disasters. Floods are not only dangerous to human life and property, they can wipe out crops and halt production of essential goods. In 2012, there was a great deal of flooding in England and other parts of the UK. The total cost of this flooding was estimated to be almost £600 million. Flooding is especially harmful to businesses that are not prepared for it.

5. Climate Change is Harming the Global Economy

Aside from short term weather patterns, there is also the question of how long term climate change may threaten the global economy. According to a recent study, climate change is costing the world more than $1.2 Trillion per year. Lloyds, a specialist in disaster insurance market, recently reported that natural disasters are the second most threatening risk for “systemic shock on a global scale”. Since the economies of the world are now quite interdependent, climate conditions in one country can affect many other parts of the world. For example, a drought or other natural disaster in Asia can cause a rise in prices for foods exported from the affected region. Keep up to date with the latest market movements here.

Economies Are Always Influenced By Weather

The weather always has an impact on the economy. This is the case in almost every industry. Both short term weather patterns and long term climate change are major factors that affect things like retail sales, the price of goods and the availability of certain items.


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