Tropical Storm Irene’s trek up the US east coast caused less damage than many had feared, a bit of reassuring news for a fragile economy.
Insured damages from the storm will likely range between US$2 billion and US$3 billion, and total losses will likely be about US$7 billion, according to preliminary estimates from Kinetic Analysis Corp, a consulting firm.
Both figures are lower than had been expected, suggesting that the storm poses little threat to the nation’s US$14 trillion economy. Some economists said that, as with past hurricanes and earthquakes, the recovery could end up boosting growth in the coming months.
For example, demand for building repairs might help the depressed construction industry.
“Irene left several places with black eyes, but it doesn’t seem to have delivered an economic knockout,” said Ryan Sweet, an economist at Moody’s Analytics.
In the short run, the costs will grow as storm-ravaged areas deal with lost business, dislocated workers and transportation delays — damage that will take months to understand. In some areas, the impact will be measured in lost revenues from tourism, canceled flights and shuttered stores.
Irene slammed into a region that’s vital to the economy’s health. The mid-Atlantic and New England account for about 16 percent of the nation’s economic output and about 14 percent of its workforce, Sweet said.
However, Kinetic’s estimates suggest that Irene will have caused far less insured damage than the US$6 billion the insurance industry paid out after Hurricane Isabel struck the east coast in 2003. Other analysts agreed broadly with Kinetic’s early estimates, saying insured losses are unlikely to exceed US$4 billion. Other consultants will release their own projections this week.
Sweet said small businesses on the North Carolina coast will likely lose two weekends of tourist activity, including the travel-heavy Labor Day weekend. Beach communities spanning the east coast face the same threat.
Economists said that reconstruction from Irene could increase US economic growth in the October-to-December quarter, though the benefits will be limited by the relatively slight damage the storm caused.
“This region is very highly insured, so a lot of money will start pouring in, and that should re-employ a lot of construction workers who are now out of work,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi said the benefits from rebuilding might extend into next year’s January-to-March quarter.
“That will put some people back to work, at least temporarily,” said David Kotok, chairman of Cumberland Advisors.
For now, power outages and flooding will close some businesses, costing workers pay and likely increasing some temporary layoffs. Transportation and shipping may also be disrupted. The length of the outages and the extent of public transportation problems in cities like New York will help determine the costs, analysts said.
Economists expect a post-storm rise in applications.
One concern is that weak economic data, even if blamed on a natural disaster, could weigh on consumer confidence and make businesses reluctant to spend.