Economists say the heat wave will cost the Texas economy $9.55 billion

Texans — both two-legged and four-legged — have been reeling under a prolonged heat wave of historic proportions this year.

Heat not only affects the quality of life, but it also affects the economy. Economic losses result from lower agricultural yields and declines in overall productivity, not to mention increased morbidity and mortality. However, those losses may be offset by gains from other sectors, such as increased utility consumption.

Biggest loss industries

Real estate – $1.981 billion
Insurance carriers and related activities -$1.786 billion
Total trade – $1.014 billion

Highly profitable businesses

Utilities +$461.6 million
Funds, trusts and other financial vehicles +$183.5 million
Production of petroleum and coal products +$103.5 million

Perryman’s team decided to put together the potential effects of the current heat wave and the potential effects of a long-term trend toward warmer summers. To do so, the agency combined baseline projections from its US Multi-Regional Econometric Model, a detailed analysis of economic responses to average temperature changes over decades in all 50 states. This allowed detailed modeling for a comprehensive set of several hundred industries.

Using this modeling, the Berryman Group estimates the net loss to the Texas economy from the heat wave — assuming this summer lasts through August, with average daily temperatures 2.6 degrees above the state’s long-term average — would be about $9.55 billion in real gross output, a reduction in growth of about 0.47%.

Agriculture (over 5.7%) saw the largest absolute losses in the financial sector ($3.91 billion) due to losses in crop insurance and services ($2.11 billion) due to declines in professional and business services. A major source of losses is ultimately due to reduced productivity.

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