Everyone knows that the weather can affect your mood but it can also have a serious impact on business. The 2015-2016 winter season has been one of the warmest and mildest on record for the Northeast Region, and it’s expected to have a positive impact on local businesses. Getting blasted with snow last winter forced many businesses to close, often for several days at a time. This obviously resulted in a loss of revenue as businesses could not invoice for work that had not been completed. However most companies resumed business when the weather cleared and were caught up fairly quickly. For shops that were busy, and had a regular backlog of work, they were forced to pay employees overtime pay to get caught up on back jobs. In particular with a winter like last year that included multiple storms hitting and shutting down New England businesses again and again it can be impossible to get caught up without paying the high cost of overtime. For most manufacturing companies the work is considered “fixed bid” meaning the customer is paying you for the work completed regardless of whether it takes a week or three weeks to get it turned around which leaves no room for added employee costs. According to an NBC report the winter storms last year resulted in roughly $15 billion dollars in recoverable losses throughout the economy.
The effects of closing a business can be far-reaching. Large companies with offices in multiple locations struggled to complete projects. Progress would often get hung up waiting for someone who was out of the office in the northeast or other location. Other companies who used job shops in the northeast grew frustrated with the delays in getting completed components and chose to move the work to shops in warmer weather climates to ensure an on time delivery. All of this can significantly depress a local economy such as New England’s. Studies have also shown that layoffs are more common in cold weather months, thus further increasing the benefits of this year’s more temperate winter season.
Shipping and rigging for new equipment can also become an issue. When the weather prevents trucking companies from delivering new equipment, or limits the ability for it to be offloaded, it slows both production and new equipment manufacturing. Many OEMs of large manufacturing equipment saw a slow down through last winter as new machines were not being purchased when customers were unsure when they could get them delivered or were too busy getting caught up on their backlog of work. Certainly as these large OEMs slow down many of the smaller businesses that supply them with parts also feel the pain of the slow down.
There are some business sectors that don’t see the benefits of improved weather such as seasonal work as well as disaster recovery businesses. For example construction companies were kept especially busy dealing with roofing repairs after many that collapsed last year and HVAC companies had an increase in work for heating needs. However the majority of businesses have benefited from this more mild winter and should expect to see that in their quarterly numbers.