Let’s face it. Fifty-two inches into the snowiest winter in Indianapolis history, challenges extend beyond avoiding deep potholes or figuring out who can watch the kids on yet another snow day. These extreme conditions have thrown a kink into the first quarter of operations for U.S. manufacturers. In the January 2014 Manufacturing Institute for Supply Management (ISM) Report on Business, many cite adverse weather conditions as a factor impacting their businesses.
Respondents from the petroleum and coal products industries report, “Good finish to 2013, but slow start to 2014, mostly attributed to weather.” And respondents from the plastics and rubber products industries say, “We have experienced many late deliveries during the past week due to the weather shutting down truck lines."
Weather has been cited as a factor behind a series of economic reports, and it is expected to be a factor in the February 2014 ISM data that will be released in March. Economists say winter economic reports are seasonally adjusted to account for bad weather, so consideration exists for weather impact, but not to this magnitude.
Across Indiana, Old Man Winter has wreaked havoc for manufacturers, such as RV producers in Elkhart who have fallen behind in production due to the multiple snow emergencies. Ken Julian, vice president of human resources for RV manufacturer Thor Industries says, “When we lose a day of production, it can put us back two or three days." Thor is not alone. Hundreds of manufacturers across the state have been forced to find ways to try and make up for lost days and revenues. Some manufacturers may extend the production week and have employees work Saturdays until they feel caught up (which lowers manufacturing profitability through increased costs). The weather has certainly shifted economic activity, but the spring should recoup any losses, and, hopefully, sunny vacations.
Tim Murphy is an accountant in Katz, Sapper & Miller's Audit and Assurance Services Department, which is comprised of individuals skilled at evaluating business and control risks for clients.