WASHINGTON (AP) — Superstorm Sandy will end up causing about $20 billion in damages and $10 billion to $30 billion more in lost business, according to IHS Global Insight, a forecasting firm.
In the long run, the devastation the storm inflicted on New York City and other parts of the Northeast will barely nick the U.S. economy. That’s the view of economists who say higher gas prices and a slightly slower economy in coming weeks will likely be matched by reconstruction and repairs that will contribute to growth over time.
The short-term blow to the economy, though, could subtract about 0.6 percentage point from U.S. economic growth in the October-December quarter, IHS says. Retailers, airlines and home construction firms will likely lose some business.
The storm cut power to about 7 million homes, shut down 70 percent of East Coast oil refineries and inflicted worse-than-expected damage in the New York metro area. That area produces about 10 percent of U.S. economic output.
Hurricane damage to homes, businesses and roads reduces U.S. wealth. But it doesn’t subtract from the government’s calculation of economic activity.
By contrast, rebuilding and restocking by businesses and consumers add to the nation’s gross domestic product — the broadest gauge of economic production. GDP measures all goods and services produced in the United States.
Across U.S. industries, disruptions will slow the economy temporarily. Some restaurants and stores will draw fewer customers. Factories may shut down or hold shorter shifts because of a short-term drop in customer demand.
Some of those losses won’t be so easily made up. Restaurants that lose two or three days of business, for example, won’t necessarily experience a rebound later. And money spent to repair a home may lead to less spending elsewhere.
Shipping and business travel has been suspended in areas of the Northeast. More than 15,000 flights across the Northeast and the world have been grounded, and it will take days for some passengers to get where they’re going.
On Tuesday, more than 6,000 flights were canceled, according to the flight-tracking service FlightAware. More than 500 flights scheduled for Wednesday were also canceled.
The three big New York airports were closed Tuesday by the Port Authority of New York and New Jersey. New York has the nation’s busiest airspace, so cancellations there drastically affect travel in other cities.
Economists noted that the hit to the economy in the short run was worsened by the size of the population centers the storm hit.
“Sandy hit a high-population-density area with a lot of expensive homes,” said Beata Caranci, deputy chief economist at TD Bank.
Caranci said the economic damage in the short run could be heaviest for small businesses that lack the money and other resources to withstand lost sales.
“It will remain to be seen how long disruptions to electricity and infrastructure persist,” she said.
But she noted that the storm should give a boost to the construction industry, which shed millions of workers after the housing bust. Many who lost construction jobs were skilled employees with disproportionately high pay, and the loss of those jobs hit the economy hard.
Economists expect that the actual damages from Hurricane Sandy will exceed those caused last year by Hurricane Irene, which cost $15.8 billion. Irene had little effect on the nation’s growth.
Sandy will likely be among the 10 costliest hurricanes in U.S. history. It would still be far below the worst — Hurricane Katrina, which cost $108 billion and caused 1,200 deaths in 2005.
But “there is every reason to believe that the hurricane won’t kick the legs out of an already-fragile US economy,” Caranci said.
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