Feeling Sandy

Early estimates for the economic costs of the storm that hit the east coast of the United States range from $20 and $50 bln. Hurricane Katrina in 2005 still appears to be more potent. 

There are three main channels through which the economic impact is felt—property damage, infrastructure damage and lost business. Lost business averages around 40% of total costs, but some experts from the insurance industry warn that this time it may be higher because dense urban population centers have been hit. 

Other experts warn that the property damage will be severe. Here private and/or government insurance will help absorb the cost to homeowners. Initial estimate warn that infrastructure damage is also substantial. Auto sales and retail sales and the larger category of personal consumption will initially be depressed by the storm. 

The pessimists are warning that all told the storm could shave 0.5% off US annualized Q4 GDP, which seems twice as much as a back-of-the envelop calculation on the idea the fully costs are borne in Q4 and there is not offset, like increased sales for re-building. 

Many are asking about the political implications of the storm. On one hand, it is during the response to crisis that government assistance may be most widely appreciated, perhaps making it somewhat less tenable for the independent voters to accept minimal government arguments. On the other hand, most the affected area were not considered closely contested by the pollsters.