Extreme cold weather's impact on business in the Midwest

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The extreme cold weather in much of the U.S. this week means many people are staying home – and it’s having an impact on businesses.

Schools, university campuses, museums, zoos and churches closed across the Midwest. Big retailers like Home Depot, Grubhub, Walmart, and Kmart are expected to stay open, but are monitoring the weather conditions. And traffic at restaurants in the Chicago area is expected to decline by 5% this week. There were over 3,000 flight cancellations in the U.S. on Wednesday, including more than 59% of flights out of Chicago’s O’Hare airport, according to flight tracking site FlightAware.

“Short term it’s going to have a very significant negative impact,” says Paul Walsh, IBM’s global director of consumer weather strategy. With a forecast of minus 23 degrees in Chicago, “the entire Midwest is shut down. So from a commerce, business perspective, everything is stopped and it’s going to, of course, spread across the rest of the country,” he says.

Ice forms along the shore of Lake Michigan before sunrise, Wednesday, Jan. 30, 2019, in Chicago. A deadly arctic deep freeze enveloped the Midwest with record-breaking temperatures on Wednesday, triggering widespread closures of schools and businesses, and prompting the U.S. Postal Service to take the rare step of suspending mail delivery to a wide swath of the region. (AP Photo/Kiichiro Sato)

The deep freeze isn’t expected to persist – Chicago is expected to see 40 degrees and above next week. Walsh says U.S. retail is poised to have a strong first quarter.

The last time businesses faced a similar situation was in 2014 when another polar vortex gripped much of the country. It cost the U.S. economy $5 billion. Walsh does not expect the impact of this one to be as dramatic.

“The negative effects will be relatively short-lived. There will probably be some infrastructure impacts, a lot of broken pipes,” Walsh says. “But when there are hurricanes [and other severe weather conditions], there’s always a rebound that happens in weeks and months later when the money comes back in. That’s the silver lining.”

No doubt restaurants that have stayed open are delivering more food this week, while people search for beach vacations online. Once the first glimmer of spring comes into view, “it gets people in the mood to go out and start buying,” says Walsh. “That usually happens right around the Easter break.”

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