(Yahoo! Finance) - The US economy is currently buried under several inches of record-breaking snow, and Bank of America warns the thaw for investors might not arrive until the second quarter.
"We project that Winter Storm Fern will lower 1Q 2026 GDP by 0.5-1.5pp on a [quarter-over quarter seasonally adjusted annual rate] basis," BofA economist Aditya Bhave wrote in a note to clients on Monday.
Bhave noted these estimates are based in part on the impact Winter Storm Viola had in 2021. He suggested that while the "precedent" for a growth freeze is clear, much of the economic activity is likely delayed rather than destroyed.
"Some output will be permanently lost due to winter storm Fern," Bhave said. "However, we wouldn't expect any lasting impact on the trajectory of the economy."
The bank remained "bullish," viewing the storm as a timing reshuffle where the second quarter will likely inherit the growth that Fern stole from the first.
The sudden chill comes just as the American consumer was beginning to find their footing in the new year. According to a recent BofA report, total card spending per household was up 3.3% year over year for the week ending Jan. 17.
The bank noted that "2026 was off to a good start," with gains in lodging and grocery spending potentially driven by households anticipating larger tax refunds. The early momentum suggested that the economy wasn't slowing down on its own, rather, it was forced into a standstill by the weather.
To reach the 1.5% headwind figure, BofA used the 2021 Viola data to isolate the effect of extreme weather on consumer behavior. By tracking aggregated credit and debit card data from the period, the bank found that total card spending plummeted by 3.7% year over year during the storm's peak in February 2021.
While the comparison isn't perfect, it provides a cold reality check for current growth estimates. Unlike Viola, which caused serious damage to the Texas power grid, Fern's force has targeted the Northeast — a region with a much higher concentration of high-income households, per BofA. When these high-spending corridors are snowed in, the impact on discretionary data is often more pronounced.
The sheer scale of Fern justifies this cautious outlook, with more than 230 million Americans — roughly 70% of the population — falling under winter weather alerts. The storm has already triggered an aviation meltdown, with over 13,000 flights canceled over the weekend, marking one of the most disruptive weather events for US travel in years.
For market watchers, the big question is likely centered on how much of this lost growth is permanent.
Ultimately, January data was already expected to be noisy due to seasonal adjustments and the high bar set by December. While Fern provides a convenient excuse for a first-quarter tumble, the underlying trajectory of the economy appears to remain intact.
"This means there is as much upside to 2Q GDP growth as there is downside to 1Q," Bhave wrote.
