A Perfect Storm?

What are the economic effects of Hurricane Irene?

The storm caused major flooding and disrupted businesses all along the East Coast. It tested flood-level records in New York City and much of the eastern seaboard. Also, the storm itself disrupted plans all along its path, as people prepared for the storm and cleaned up their yards and neighborhoods afterwards.

Direct casualty losses from Irene vary, but estimates are currently running around $20 billion. These range from cars lost to falling trees or floods, to entire houses swept away off the coast. Add to this about two days of economic activity, spread out over a week, and the total cost of Irene could be somewhere on the order of $40 to $45 billion. That’s around 3% of the economy. Could that push the US into recession?

But, of course, many of those direct losses are insured. Homeowners typically buy policies that include coverage of storm-damage, and folks in low-lying areas are often required to get flood-insurance coverage. In the case of cars that were harmed by falling limbs or water, even if folks weren’t insured they still need transportation. It’s likely that those losses will be compensated for somehow, either through repairs or repurchases.

With almost 14 million people looking for work, and many of those in the construction industry, it is likely that much of the physical damage of the storm will be repaired, and rather quickly. But what about the lost productivity? Often, when something is reconstructed, the owners are able to improve it. Older homes on the shore can be rebuilt up to code. When you factor these improvements in, the total economic impact of the storm is likely to be minimal.

I don’t want to discount anyone’s personal loss, but economy-wide, this hurricane was no disaster. Far from being a perfect storm, Irene was more of a wash-out.

[display_podcast] A Perfect Storm?
By |2017-07-17T12:35:02+00:00August 29th, 2011|Economics, Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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