Economic losses from the storm will likely exceed the $12 billion to $16 billion in damage from Hurricane Irene, which battered the Northeast in August 2011, says Mark Zandi, chief economist of Moody’s Analytics,
Peter Morici, an economics professor at the University of Maryland’s Smith School of Business, estimates Sandy will result in $35 billion to $45 billion in total losses. Eqecat, which does catastrophic risk models, projects $10 billion to $20 billion in total economic damages, about half insured.
But property damage will be repaired, and lost economic output will largely be offset by other increased activity as residents rushed into stores to prepare for the hurricane.
“Assuming the storm creates havoc for no more than a few days, there should be little impact on fourth-quarter” gross domestic product, Zandi says. He hasn’t revised his forecast for annualized growth of 1.9 percent this quarter.
The storm forced the New York Stock Exchange to extend Monday’s closing to Tuesday – the first unplanned shutdown since the Sept. 11 terrorist attacks. The Port of New York and New Jersey, whose terminals make up the third-busiest container port in the country, also was temporarily shuttered and evacuated. And a Phillips 66 refinery in Linden, N.J. and a Hess refinery in Port Reading, N.J., closed.
The potential damage to homes from Hurricane Sandy-driven storm surges is likely to be greater than it was last year for Hurricane Irene, says Tom Jeffrey, senior hazard scientist for real estate market watcher CoreLogic. All told, nearly 284,000 residential properties valued at almost $88 billion are at risk for potential storm surge damage among the coastal Mid-Atlantic states, CoreLogic estimates.
Many people are not insured against such losses. But many homes in flood-prone areas are required to have flood insurance to get a loan.
The hurricane also means lost wages, production and sales for businesses throughout the region, which makes up about 15 percent of the nation’s economy. Business lost by department stores could be made up in coming weeks but lost restaurant sales will not be recovered, says Diane Swonk, chief economist of Mesirow Financial. At the same time, grocery stores and home-improvement outlets are realizing net gains as customers stock up on water, generators, flashlights and batteries.
Retailers did see an uptick in online sales during Hurricane Irene in August 2011, says Vicki Cantrell, executive director of Shop.org, the National Retail Federation’s online division. Any increase, however, was likely more than offset by the decline in in-store sales during that storm, she says.
Swonk says homeowners forced to repair damage will likely make further renovations that they’ve put off, boosting economic growth.
The storm is “unleashing pent-up demand,” she says. “It’s the most perverse stimulus to the economy.”
© Copyright 2012 USA TODAY, a division of Gannett Co. Inc., Paul Davidson, Jayne O’Donnell and Julie Schmit
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