Hurricane Sandy May Slow Economy as Workers Stay at Home

One Wells Fargo Center – Charlotte, North Carolina, will succeed as Headquarters for East Coast Operations of Wells Fargo (Photo credit: Wikipedia)

Chicago, Oct.31, stock investing .- Hurricane Sandy may slow the world’s largest economy by keeping millions of U.S. employees from work and shoppers from stores in one of the nation’s most populated and productive regions. The storm may cut economic output by $25 billion in the fourth  quarter, according to Gregory Daco, a U.S. economist at IHS Global Insight in Lexington, Massachusetts. He said that could reduce the fourth quarter pace of growth to between 1 percent and 1.5 percent, from the firm’s earlier estimate of 1.6 percent.

Sandy lashed a region with 60 million people -- about as many as Italy -- that accounts for about a quarter of the $13.6 trillionU.S. economy, estimates Eric Lascelles, the Toronto- based chief economist at RBC Global Asset Management Inc. It forced the closures of U.S. financial markets, halted air and rail service and idled workers for the federal and state governments from Virginia to Massachusetts.

“If people aren’t going to Broadway shows and restaurants and hotels all those businesses that rely on people spending money are going to take a hit for sure,” said Stephen Bronars, a senior economist at Welch Consulting in Washington and an adjunct professor at Georgetown University. “People are still going to go out and buy a car or other durable goods they need, they’re just not going to do it this week. There will be winners and losers.”

Slower Growth

The storm may reduce gross domestic product by as much as 0.2 percentage point this quarter, said Mark Vitner, a senior economist at Wells Fargo & Co. in Charlotte, North Carolina. The cost in lost output comes to about $30 billion, estimates Lascelles.

“The U.S. economy should be dinged,” Lascelles said. “This is an incredibly densely populated area and it’s a source of a disproportionate share of U.S. economic output.”

Sandy may cut November same-store sales by as much as 3 percent after retailers shut locations along the East Coast, according to an Oct. 28 note from Oliver Chen, an analyst at Citigroup Inc. in New York. At the same time, supermarkets and home-improvement stores such as Home Depot Inc. (HD) may benefit.

The physical damage wrought by Sandy is poised to exceed $20 billion, after the storm slammed into the East Coast, damaging homes and offices and flooding the New York City subway system. The total would include insured losses of about $7 billion to $8 billion, said Charles Watson, research and development director at Kinetic Analysis Corp., a hazard- research company in Silver Spring, Maryland. “While hurricanes and other natural disasters are extremely negative for wealth, they are usually positive for growth,” Jason Schenker, president of ... Continue to read.

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