Forget The Snow, It's The Drought That Is Crushing The US Economy

With all eyes and talking heads focused on the 'weather', it seems cold, wet, snowy, and frigid are the most GDP-destructive adjectives. However, as Bloomberg reports, the drought out West is starting to infiltrate U.S. housing data, according to the chief economist of a homebuilders' group, and weakening a major part of the nation's economy.


As Bloomeberg reports,

Housing starts in the West fell for a third straight month, dropping by 19 percent in March to an annualized rate of 201,000 for the weakest since May. Construction rebounded from harsh winter weather in other parts of the country, such as the Northeast, where they jumped a record 115 percent, and the Midwest.



The weakness in the West might reflect the record-setting drought, which may be discouraging companies from building or taking out permits for new construction, said David Crowe, chief economist at the National Association of Home Builders in Washington. Uncertainty surrounding local water policy and the ability to obtain water connections for new homes or apartment buildings could be holding some builders back, he said.


"Until it's clear what restrictions mean for new building, it's wise for builders to be hesitant," Crowe said. "This is more serious than just a temporary dry period. This is a new regime that says it's going to be harder to obtain additional water usage."

And it's not just California...

About 21 percent of the contiguous U.S. fell in the "moderate" to "extreme" drought categories at the end of March, according to the Palmer Drought Index, which dates back to the beginning of the 20th century.



States such as California, Nevada and Wyoming were experiencing extreme drought in some or all of their boundaries last month, according to the National Climatic Data Center.

Of course, this weakness is transitory - just like the multi-decade drought that is being forecast; but analysts are ever full of hope:

"When it comes to new-home construction, the stage is set for strength in the second quarter," Patrick Newport and Stephanie Karol, U.S. economists at IHS Global Insight, wrote in a note to clients.

Tomorrow... just you wait...