Rudi's View: The Weatherman Did It!
By Rudi Filapek-Vandyck, Editor FNArena
I spent most of my year-end break in New York with local citizens reminding me, every day, about the unusually mild weather. Despite all my preparations in advance, it didn't take long for me to figure out that a white Christmas was simply not on the cards. Most of my family lives in Europe. There the same theme reigns whenever we call or email each other; the weather is unusually mild for the time of the year.
In financial markets, most attention from weather deviations is usually dedicated to energy and agricultural markets, with focus on lesser demand for the first (hence prices should come down) and potential disruptions to crops in the second market which can have significant impact on short term prices.
This year, however, I would like to put forward that the unusually high temperatures in the Northern Hemisphere are likely to cause a noteworthy impact on economic data in general. This because not only are this year's temperatures too high compared with historical norms, last year's winter was unusually cold making the different weather related dynamics for economic data extra-pronounced since we all like to compare them on an annual basis.
Thanks to analysts at Barclays we now have a chart which shows exactly what I am talking about. Below are the UK average mean temperature deviations up until November and it becomes immediately obvious the differences with temperatures in 2010 are unusually large.
Bottom line (in my view): let's not get too excited about better-than-anticipated economic data in Europe and the US just yet. If my thesis is correct and the weather is playing havoc with this year's data, then surely as night follows day, we will see a "correction" kicking in at some point. When exactly that is might be dependent on... the weather.