Log Out | Member Center

55°F

78°/56°

Is wintry weather behind slowdown? Fed is watching

  • Associated Press
  • Published Friday, Feb. 28, 2014, at 7:06 a.m.
  • Updated Friday, Feb. 28, 2014, at 7:47 a.m.

Photos

Weathering the economy

Federal Reserve Chair Janet Yellen isn’t the only one who thinks winter weather has churned up the economic waters. Here are some of the companies that are blaming snow and freezing temperatures for putting the ice on their own sales:

• Wal-Mart Stores Inc. closed more than 200 of its stores during its fourth quarter. Its profit fell 21 percent and it gave a subdued forecast for the year. Other factors, such as food stamp cuts, are hurting its business.

• Macy’s Inc. also closed stores because of winter storms. At one point during January, about 30 percent of its Macy’s and Bloomingdale’s stores were shut. Macy’s said business remained sluggish until Valentine’s Day but hopes sales will bounce back in the spring.

• Toll Brothers Inc. said that freezing, snowy weather in January and February is weighing on its business in the Northeast, Mid-Atlantic and Midwest, which make up about half of the homebuilder’s market. The company said this was one of the worst winters it’s seen and expects delays and added costs. But it is optimistic home sales will rebound in the spring.

• Home Depot Inc. estimated that it lost $100 million in the month of January because of bad weather. The home improvement retailer has benefited from a recovering housing market but a slowdown in November and December has hampered its business.

• McDonald’s Corp.’s sales at established U.S. stores fell 3.3 percent in January, hurt by bad weather.

— Federal Reserve Chair Janet Yellen noted Thursday that some recent economic data have pointed to weaker-than-expected gains in consumer spending and job growth. She said the Fed will be watching to see whether the slowdown proves only a temporary blip caused by severe winter weather.

Yellen told the Senate Banking Committee that the Fed will be alert to upcoming data to make sure that the economy keeps strengthening.

“We have seen quite a bit of soft data over the last month or six weeks,” Yellen said. “We need to get a firmer handle about how much of the softer data can be explained by the weather.”

Responding to a question, Yellen repeated the Fed’s assurances that its pullback in stimulus for the economy is “not on a preset course” and could be modified if there was a “significant change” in the Fed’s outlook. The Fed is gradually reducing its monthly bond purchases, which have been intended to keep long-term loan rates low to encourage spending and growth.

Yellen said that while she was open to changing the pace of the Fed’s reductions in bond purchases, “I wouldn’t want to jump to conclusions” that such a change will be needed.

Yellen repeated remarks she made to a House committee earlier this month that the job market’s recovery is “far from complete.” She said she expects Fed policies to favor low interest rates “for quite some time.”

Yellen’s appearance Thursday completed her first twice-a-year report to Congress since becoming Fed chair this month. Her Senate appearance had been postponed by a snowstorm that shut federal offices in Washington on Feb. 13.

In both her House and Senate appearances, Yellen sought to emphasize policy continuity with her predecessor, Ben Bernanke, who stepped down last month after eight years leading the central bank.

Yellen said that she, like Bernanke, believed the economy is strengthening enough that the Fed can gradually pull back its monthly bond purchases.

The Fed has cut the pace of bond purchases at both its most recent meetings. It reduced the original $85 billion monthly pace in December and again in January in $10 billion steps to a current level of $65 billion.

Many economists think that as long as the economy keeps improving, the Fed will keep cutting the bond purchases by $10 billion at each meeting this year until ending the program in December.

The Fed has stressed that it’s standing by a plan to keep a key short-term rate at a record low near zero for an extended period. At the past two meetings, it has said short-term rates will remain low “well past” the time unemployment drops below 6.5 percent. The unemployment rate is now 6.6 percent.

Many economists think the first rate hike won’t occur until late 2015. But minutes of the Fed’s last meeting showed that “a few” policymakers felt it might be appropriate to make the first move to raise short-term rates “relatively soon.”

Subscribe to our newsletters

The Wichita Eagle welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views. Please see our commenting policy for more information.

Have a news tip? You can send it to wenews@wichitaeagle.com or consider joining the Public Insight Network and become a source for The Wichita Eagle.

Search for a job

in

Top jobs