Snowstorms batter US economy

Snowstorms batter US economy

Heavy snow has fallen in New York

Massive snowstorms across the north-eastern US have dealt a further blow to the economy, and especially to the already ailing airline industry.

At their heaviest, the storms dumped four feet of snow on the Appalachian mountains in western Maryland, and caused havoc in Washington DC, New York and other eastern cities.

This has caused a temporary financial headache for local governments, with the New York City administration, for example, spending $17m on the immediate clean-up alone.

Municipal budgets, already under enormous strain in many major cities, are likely to be rewritten.

But while the scale of the clean-up bill may be modest in comparison to hefty budget deficits, the effect on retailers and airlines could be more damaging.

Holiday ruined

US retailers, suffering from an uncertain consumer base, were counting on Monday's President's Day holiday to get rid of unsold stock.

Airlines did not need more bad news

But many large firms, including market leader Wal-Mart, have been forced to close stores all along the north-eastern seaboard.

And the snow affected deliveries - freight rail giant CSX cancelled all but the most essential trains.

Airlines, meanwhile, which were also hoping for brisk business over the holiday weekend, may have even more lasting problems.

"We will definitely see the transportation sector negatively impacted," said Jan Hatzius, senior economist at Goldman Sachs.

"This comes at a horrible time for airlines."

Further blow

Although most airlines were hoping to get their schedules back to normal by Wednesday, they have suffered enormous disruption over the past few days.

On Monday alone, American Airlines cancelled one-quarter of its schedule, 627 flights, and United Airlines cancelled about 380 flights.

This disruption comes at a time when US airlines have been suffering financial pain for almost two years, the effects of which have already pushed United and others into bankruptcy.