The economic damage caused by Hurricane Sandy could reach a level of more than twice higher than previously estimated, writes New York Times. In addition, some economists warn that hurricane could wipe 0.5 percentage points from U.S. economic growth in the fourth quarter.
The losses due to the storm could reach $30 billion to $50 billion, according to Eqecat, a company that keeps records of hurricanes and analyze damage produced by them. Monday, just before the storm hit the U.S. east coast, the company estimated economic losses between $10 billion and $20 billion.
Why the initial damage estimates rose
Flooding of the subway tunnels and road tunnels in New York and the losses of major businesses as a result of electricity failures throughout the region were the cause of the strong spike in the level of losses, the company said.
“Geographical scope of the storm was unprecedented and the impact on individuals and businesses was much higher. Loss of electricity contributed to higher insurance losses,” said Tom Larsen, senior vice president of Eqecat.
The company predicted that New York could bear 34% of the total economic losses, while New Jersey would bear 30%, Pennsylvania – 20%, and other states – 16%. This includes all losses, whether they are covered by insurance or not. Estimates of the share of the losses covered by insurance is far from clear figures at this point, given that government officials, owners and insurers are struggling to assess the damage.
Delayed recovery for retail and transportation
While the stock market, banks and other financial institutions have resumed work on Thursday, other sectors such as retail, transportation, accommodation and recreation are facing a longer and more difficult recovery.
With a low fuel supply in many areas and warnings that electricity could return in more than a week in some areas, businesses are in a position to prepare for something that is equivalent to a long siege.
FedEx, for example, try to rent fuel tanks for its trucks in New York and New Jersey, while the gas stations were depleted of fuel stocks.
As the logistical problems grow and damage estimates increase, economists rose their estimates of the hurricane impact.
“I think the effect will be major. In the fourth quarter, we will most likely have an impact of half a percentage point,” said Julia Lynn Coronado, chief economist at North America and BNP Paribas. According to her, some losses could be included in the first quarter of 2013, when the compensation from insurers will reach business and private owners.
Impact less than half the 9/11 and Hurricane Katrina
Hurricane Sandy will join the list as one of the biggest disasters in terms of economic impact, but it will not top the list, said Mark Zandi of Moody’s Analytics. He estimated that losses caused by Hurricane Sandy will be less than half of those suffered in the terrorist attacks of 9/11 and Hurricane Katrina.
Moody’s Analytics also estimates the impact to around $50 billion, about $12 billion loss in the New York City metro area.
About $20 billion would come from the loss of business in restaurants, flights canceled, bets that are not held in casinos etc, Zandi estimates. The rest of the $30 billion will be loss of property, including damage to houses, cars, and businesses, he says.
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