Extreme Temperatures, Adaptation Capacity, and Household Retail Consumption

While the large cost of extreme temperatures on production is well documented, relatively little is known about its impact on consumption despite its importance for welfare. Using high-frequency micro-shopping data from US households, we report three findings. First, deviating from mild temperatures negatively affects the number of store visits, but the impact on overall purchases is moderated by greater purchases per store visit, especially for extremely cold days. Second, households actively manage inventory over time, which nullifies the impact of extreme cold. However, extreme heat appears to have a persistent negative impact on consumption. Third, passenger cars substantially moderate the negative impact of extreme temperatures on consumption while rideshare services or public transit do not produce comparable moderating effects. These findings suggest that the economic cost of extreme temperatures on consumption is likely to be concentrated on disadvantaged households.