Daylight Saving Time (DST) is the adjusted time schedule that is followed in most states during the warmer months of the year to increase the amount of natural sunlight during the typical waking hours of the day. It begins in the spring when clocks are set forward from standard time by one hour and ends in the fall when clocks are returned to standard time. The policy affects over 300 million Americans. Notable exceptions include Arizona, Hawaii, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. Although DST was originally motivated by efforts to reduce energy costs, the economic impacts of DST have been difficult to evaluate.
The energy saving rationale for DST has not been well supported by academic research. The benefits of reduced lighting costs are largely offset by increased air conditioning costs during the day and higher energy demands during the darker mornings of the DST period. There is a perception that DST increases spending among those consumers who make use of the extra daylight to frequent shops and restaurants, or spend money on outdoor recreation and other activities. The strongest advocates for the policy have been supporters of small businesses and retailers, like chambers of commerce and outdoor entertainment providers like the golf and barbecue industries.
In advance of the return to Standard Time this November, the JPMorgan Chase Institute used its unique lens to measure the impacts of DST on consumer spending. Specifically, we sought to test whether or not DST provides the benefits that advocates advance in support of the policy. Using an anonymized sample of daily credit and debit card transactions, we compared consumer spending in Los Angeles, a city that observes DST, to that of Phoenix, a city that does not observe DST. We chose Los Angeles as our comparison city because of its relative proximity to Phoenix, relative stability of climate during the study window, and the robust volume of spending we could observe in both cities. The sample for this study draws from over 380 million transactions made by over 2.5 million anonymized customers.
Our unprecedented view of spending around the beginning and end of DST does not support consumer spending claims of DST advocates. Our analysis finds the policy is associated with a 0.9 percent increase in daily card spending per capita in Los Angeles at the beginning of DST and a reduction in daily card spending per capita of 3.5 percent at the end of DST. The increase in spending at the beginning of DST is determined by comparing daily card spending per capita in the 30 days before DST starts, to daily card spending per capita in the 30 days after DST starts. The decrease at the end captures a similar window to compare spending in the 30 days before and after the end of DST. Most of the impact stems from responses at the end of DST, when spending on goods drops more than spending on services, and spending during the work week drops more than weekend spending. The magnitude of the spending reductions outweighs increased spending at the beginning of DST.
Source: jpmorganchase.com
