The Potential Economic Impact of Weather and Climate on the Example of El Niño which is Back in Force for 2009 and 2010

Global warming is one thing but the cyclical El Niño is another.

Michael McCarthy, environment editor at the Independent – via Reddit – informs us that a new El Niño is developing – the second strongest El Niño on record, which means global economic impacts for the world based on weather implications in the coming 2009-2010 period.

The arrival of El Niño was reported at the NOAA, the US National Oceanic and Atmospheric Administration (NOAA) which has numerous El Niño website pages devoted to “Research, Forecasts and Observations”, where they write:

El Niño is a disruption of the ocean-atmosphere system in the Tropical Pacific having important consequences for weather and climate around the globe.

The NOAA writes inter alia about the Economic Implications of an El Niño, pointing to both unavoidable economic losses as well as forecast-based economic benefits:

Implications of El Niño for the Nation’s Economy

Weather and climate sensitive industries directly impacted by weather (such as agriculture, construction, energy distribution, and outdoor recreation) account for nearly 10 percent of GDP. Further, weather and climate indirectly impacts an even larger portion of the nation’s economy, extending to parts of finance and insurance, services, retail and wholesale trade, as well as manufacturing. Some analysts estimate that nearly 25 percent of GDP, or $2.7 trillion, is either directly or indirectly impacted by weather and climate.

El Niño impacts important business variables like sales, revenues, and employment in a wide range of climate-sensitive industries and sectors. Overall, total U.S. economic impacts of the 1997-1998 El Niño were estimated to be on the order of $25 billion….

The Economic Benefits of Better El Niño Forecasts-Improving Economic Decisions

Although all losses cannot be avoided, NOAA’s El Niño forecasts produce economic value by allowing individuals, industries, and public officials to take timely actions based on the forecast to mitigate and reduce losses or to capitalize on the information to improve economic outcomes…“

Take a look at the NOAA article on economic implications in full for more information about this important economic development.

Crossposted to our Private Wealth Blog.