Assessing Impacts of Hurricane/Superstorm Sandy

October 31, 2012 09:47 AM
 

Via a special arrangement with Informa Economics, Inc.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


U.S. economic activity to wrap up 2012 and start 2013 may actually benefit from the storm.

Following is a recap of developments related to the impacts and recovery from Hurricane/Superstorm Sandy:

USDA data affected: USDA's Crop Progress report was to have been issued Monday afternoon but was delayed by the federal government offices being closed. USDA will release Crop Progress this afternoon at 3 pm (CT) with Rice Stocks and Peanut Stocks and Processing data - reports that also were originally scheduled to come out Monday - released this morning. Meanwhile, the Weekly Export Sales report will be released Friday, Nov. 2, at 7:30 am (CT) instead of the normal Thursday release due to the storm.

Economic data: While Consumer Confidence figures that were due out Tuesday are now to be released Thursday, other economic data is scheduled to be released as usual. Contacts at the Bureau of Labor Statistics signaled Tuesday that they were working to ensure that the key Employment Situation report due out Friday morning Nov. 2 will be released as scheduled.

Power restoration: More than 8.5 million people were without power at the peak of the storm and the numbers already have decreased. However, some areas may see several days pass before power can be restored. Crews from as far away as Texas and Oregon are either en route or already on the ground in the region to assist with power restoration.

Ag Impacts: With Crop Progress delayed this week, it's currently a guess as to how much of the U.S. corn and soybean crop remained unharvested in states like Ohio, Indiana and Pennsylvania as Sandy arrived. That will become clearer today. The poultry industry is another focus for the impacts from Sandy given its presence in eastern Maryland and Delaware, two areas hit by Sandy. How the infrastructure fared in terms of delivery of feed, electricity, etc., in the region will be key in terms of how much impact there was to that sector. But it is not expected to have a national impact on either poultry supplies or prices.

Consumer activity: While restaurant activity lost during the storm cannot obviously be made up, the impacts on the food side may be a bit more erratic. Some stocking up ahead of the storm took place and those are items that will eventually be consumed, potentially tempering consumer spending. But for those that have lost power and lost food supplies due to that situation, their recovery will involve restocking and likely could even result in some additional purchases based on their most-recent experience.

Things like autos that were submerged beyond a certain point will need to be replaced. The old rules of thumb in this area don't really apply given the increased amount of electrical components that are in today's vehicles. This could bring another push to auto/transportation sales once insurance settlements are processed etc.
The insurance side of the equation will be another factor in the recovery. How fast can consumers get reimbursed will be important in gauging the recovery efforts.

Consumer costs for fuel are likely to be more in the immediate period as the affected East Coast operations of major refineries gear back up. It appears that around one quarter of the capacity was closed with reduced runs for the remainder. Power supplies and damage from water will dictate how fact the refining capacity comes back on line.

Comments: Even though the eventual total costs won't be known for some time, Hurricane Sandy will be one of the costliest on record. Some estimates put the hurricane at the fifth costliest in history with $5 billion to $10 billion in insured losses and $10 billion to $20 billion in economic losses. That would easily top Hurricane Irene whose 2011 appearance racked up $4.5 billion in insured losses.

And trying to gauge the impact to the U.S. economy will be the task as the recovery, rebuilding and return to normal efforts get underway. Some have already suggested this could shave up to 6 tenths of a point off U.S. GDP in the fourth quarter of the year. That could be a bit steep given the recovery portion which will unfold in the fourth quarter and into the first quarter of 2013. In fact, it should actually bolster the U.S. economy for the fourth quarter of this year and first quarter of next year as consumers seek to rebuild and replace things damaged in the storm.


 

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