Sandy may slow US economy in short term, but areas like construction will benefit in long run

WASHINGTON – Hurricane Sandy will cause temporary disruptions for companies, travellers and consumers but won’t likely slow the U.S. economy in the final quarter of 2012, analysts say.

Economic growth lost to the storm can likely be restored once reconstruction begins, notes Mark Zandi, chief economist at Moody’s Analytics.

“Assuming the storm simply disrupts things for a few days and it doesn’t do significant damage to infrastructure, then I don’t think it will have a significant national impact,” Zandi said Monday.

The economic impact could be more severe if the storm damages a port or a major manufacturing facility such as an oil refinery, Zandi noted.

Preliminary estimates are that storm damage will range between $10 billion and $20 billion. That could top last year’s Hurricane Irene, which cost $15.8 billion.

If so, Hurricane Sandy would be among the 10 most costly hurricanes in U.S. history. But it would still be far below the worst — Hurricane Katrina, which cost $108 billion and caused 1,200 deaths in 2005.

Aside from the human toll, hurricanes, like other disasters, can cause big losses for insurance companies and disrupt businesses and work patterns for days or weeks. But they can also cause spikes in economic activity, once homes and buildings are rebuilt or repaired.

And Americans may spend more before the storm when they stock up on extra food, water and batteries. Spending can also rise afterward as households restock.

The overall economy expanded at an annual rate of 2 per cent in the July-September quarter. Zandi said he isn’t changing his forecast for similar growth in the current October-December quarter of 1.9 per cent.

Economic activity in October and November might slow if factory output declines and some workers are laid off temporarily and seek unemployment benefits. But the economy could strengthen in December as companies rebound.

CoreLogic, a private data provider, estimates that there are 284,000 homes worth about $88 billion in the hurricane’s path.