New York street flooded during Hurricane Sandy (Photo Courtesy: Getty Images)
Hurricane Sandy shut down Wall Street and disrupted business activity throughout the populous Northeast but it's not expected to have a significant impact on the nation's economic growth.
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% 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., shut operations, while several others curtailed production.
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.
Hurricane-driven storm surge flooding can cause significant property damage when high winds and low pressure cause water to amass inside the storm, releasing a powerful rush over land when the hurricane moves on shore.
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% of the nation's economy. Business lost by department stores could be made up in coming weeks but foregone 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.
"Our stores (from Florida to Maine) have been packed with people" since last week, says Paula Drake, a Home Depot spokeswoman.
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. Online retail still hasn't topped 10% of overall retail sales.
Carlene Igras of Bath, N.Y., turned to the websites for L.L. Bean, Eddie Bauer and Walmart to do some early Christmas shopping when her plans to fly to Florida Monday were thwarted.
Swonk says homeowners forced to repair damage will likely make further renovations that they've put off, boosting economic growth. Rising home prices are making homeowners feel wealthier, and a rash of mortgage refinancings have put more cash in their pockets.
The storm is "unleashing pent-up demand," she says. "It's the most perverse stimulus to the economy."
Swonk estimates Hurricane Sandy will add from two-tenths to half a percentage point to economic growth this quarter.