Finance and Economics Discussion Series: The Effects of Weather on Retail Sales

ISBN: 1288717393

Author: Starr-McCluer, Martha

Condition: New

Monthly fluctuations in consumer spending are often attributed to the weather. This paper presents a model in which weather affects the productivity of time in nonmarket activities (such as shopping or recreation), and so, via time and budget constraints, may induce substitution in spending across goods and over time. Using monthly data on retail sales and weather data from the National Weather Service, I find that unusual weather has a modest but significant role in explaining monthly sales fluctuations. However, lagged effects often offset original effects, so that weather's influence tends to wash out at a quarterly frequency.