August Electricity Bills = Reduced Spending Power

Higher utility bills will claim a greater share of household disposable income leaving fewer dollars to spend on dining out, back-to-school shopping, etc.

The excessive heat that enveloped much of North America during the last half of July has certainly caused a variety of short-term impacts for businesses and consumers. Companies that sell air conditioners, fans, cold beverages and sun care products have benefited from a surge in demand. On the other hand, consumers looking to beat the heat scaled back on certain products, services and activities, according to recent insights from business weather intel provider Planalytics.

As the extreme heat subsides and more normal summer temperatures return, there are some longer-term, lasting effects that the recent weather will have on the economy.

Planalytics’ Power Weather Index (a measure that isolates the impact of temperatures on electric demand) is showing the following for the U.S. as a whole:

+2% vs. July 2010 (Note: last year was the second warmest July in 50 years!)
+6% vs. the 10-year average

Many metropolitan areas in the Midwest and Northeast saw even larger increases during the last half of July (St. Louis +16%; Chicago +14%; Cleveland +11%; and Philadelphia +11% vs. the 10-year average)

"Recent 'brown outs' in New York, Texas and parts of Midwest are evidence of how much the power grid struggled to keep pace with record demand for electricity as day after day air conditioners were working away at full blast," said Paul Corby, SVP for the Berwyn, Pa.-based Planalytics. "The cost of power hit all-time highs in the Northeast and Midwest and came close to highs in other parts of the country."

Economic impacts for households and businesses include:

• Significantly higher August utility bills will claim a greater share of household disposable income, leaving fewer dollars to spend on dining out and back-to-school shopping.

• For many, disposable income has already taken a hit with unplanned purchases of air conditioners and fans or repair/servicing costs for homes (do not ask me how I know this) and car air conditioners that malfunctioned under the strain of heavy use.

• Higher electricity bills will increase manufacturing costs for many businesses, putting upward pricing pressure on finished goods sold at retail.

• For many areas in the country, the heat wave lasted only a week or two. But in a difficult economy where consumer spending is already fragile, the ramifications of those 100 degree days will be longer lasting.

For more info, visit http://www.planalytics.com.