Evaluating the Influence of the Economy on the Demand for Water: Case Studies of the Great Recession


  • Jack Kiefer - Hazen and Sawyer

Many municipal water providers recently experienced an acute drop in water consumption associated with the general economic downturn that has come to be known as the Great Recession. In some cases, the declines in water demand exacerbated existing planning and operational difficulties associated with long-term decreasing trends in water use and revenue recovery. The declines in water demand have resulted in the elimination of projects and delays in capital investments for many urban water systems. These circumstances have generated a renewed interest in understanding the role of the economy in shaping water demands, as well as potential methods for anticipating the impacts of economic shocks should they occur.

This paper will discuss principal findings of Water Research Foundation Project 4458, Water Demand in Forecasting in Uncertain Times: Isolating the Effects of the Great Recession. The discussion will summarize key observations and experiences of a survey sample of water utilities related to the Great Recession and will highlight the key pathways through which the economy influences water demand and subsequently water utilities. The results of case studies will be presented, which demonstrate the availability of economic data and how the effects of the economy can be measured and specified in statistical models of water use. The case studies will present ways in which the effects of the Great Recession were estimated and differentiated from other confounding factors, such as the price of water, long-term trends in water efficiency, and water supply shortage restrictions. Finally, the case studies will explore the use of leading economic indicators for identifying turning points in the economy and for anticipating the timing of subsequent changes in water demand. The paper will conclude with a set of practical recommendations in support of water utility efforts to cope with planning uncertainties about future economic conditions.

For more information, contact the author at jkiefer@hazenandsawyer.com.

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