Bank of America cautions that winter storm Fern may put a halt to first-quarter economic growth

US Economy Faces Setback from Severe Winter Storm

The US economy is currently grappling with the aftermath of an unprecedented snowstorm, and Bank of America cautions that investors may not see relief until the second quarter of the year.

According to Aditya Bhave, an economist at Bank of America, the recent Winter Storm Fern is expected to reduce first-quarter 2026 GDP by 0.5 to 1.5 percentage points on a quarter-over-quarter, seasonally adjusted annual rate basis.

Bhave explained that these forecasts draw on the economic effects observed during Winter Storm Viola in 2021. While there is a clear historical pattern of economic slowdowns during major storms, he believes that most business activity is postponed rather than lost entirely.

“Some production will be irretrievably lost due to Fern,” Bhave noted, “but we do not anticipate any long-term changes to the overall economic outlook.”

Bank of America maintains an optimistic stance, viewing the storm’s disruption as a temporary shift in timing, with the expectation that the second quarter will recover much of the growth missed in the first.

Consumer Spending Interrupted by Harsh Weather

The storm’s arrival coincided with a period of renewed strength for US consumers. Recent data from Bank of America shows that household card spending rose 3.3% year over year for the week ending January 17.

The bank highlighted that 2026 began on a positive note, with increases in spending on lodging and groceries, possibly fueled by expectations of larger tax refunds. This early momentum suggests that the economy’s slowdown is weather-induced rather than a result of underlying weakness.

In New York City on January 23, 2026, shoppers faced empty supermarket shelves as the city braced for an arctic blast and heavy snowfall, with extreme cold and icy conditions expected to sweep across the country.

Analyzing the Economic Impact

To estimate the 1.5% drag on growth, Bank of America analyzed data from the 2021 Viola storm to isolate the effects of severe weather on consumer habits. By reviewing aggregated credit and debit card transactions, the bank found that overall card spending dropped 3.7% year over year at the height of the 2021 storm in February.

Although the comparison isn’t exact, it offers a sobering perspective on current growth projections. Unlike Viola, which severely damaged Texas’s power grid, Fern has primarily affected the Northeast—a region with a higher proportion of affluent households. When these high-spending areas are immobilized by snow, the impact on discretionary spending is even more significant.

Fern’s vast reach supports this cautious view, as over 230 million Americans—about 70% of the population—have been affected by winter weather alerts. The storm has already caused major disruptions in air travel, with more than 13,000 flights canceled over the weekend, making it one of the most significant weather-related travel interruptions in recent US history.

Looking Ahead: Temporary or Lasting Effects?

For those monitoring the markets, a key concern is determining how much of the lost economic activity will be permanent.

January’s economic data was already expected to be volatile due to seasonal adjustments and strong performance in December. While Fern provides a clear reason for a first-quarter slowdown, the broader economic trend appears stable.

“This suggests that the potential for second-quarter GDP growth is just as strong as the downside risk for the first quarter,” Bhave commented.