Hurricane Sandy left a trail of destruction through the Northeast but the U.S. economy will not be among its victims, Moffatt & Nichol Economist Walter Kemmsies says. “This will actually boost GDP,” he said on Tuesday.
Kemmsies this week was preparing an updated forecast amid growing signs that the U.S. continues to recover, largely on the strength of consumer spending. He said his reasoning stems from a number of factors, among them that natural disasters such as hurricanes and even last year’s tsunami in Japan end up being a form of stimulus that benefits the economy.
The tsunami “hit Japan’s GDP that quarter, but the next two quarters they came roaring back and Japan’s GDP is higher than it was a year ago, and the same thing happened in New Orleans,” he said. In this case, utilities, which tend to be cash-rich, will spend heavily to bring in crews from near and far to restore power to affected areas.
One result, he predicted, will be a surprise boost in late-year imports from China.
Given that 22 percent of U.S. GDP is generated within 250 miles of Port Newark, an area heavily impacted by the hurricane, there likely will be a national impact economically, he said.
The fact that ports and other elements of the transportation infrastructure will take days to recover will cause headaches for logisticians but they will recover quickly, especially given the flexibility of the U.S. logistics system.
“It is a short-lived event, but it affected lots of people," said Kemmsies, who himself was without power on Tuesday. "You might lose a few days of retail sales, but you had a big jump in retail sales before the storm” as people stocked up on flashlights, food and other necessities. Following the storm, “you will see a spike in retail sales from the one-fifth of the economy that is in this area.”
As with others before it, the storm will disproportionally affect lower income people, who face high unemployment and weren’t being looked to as big contributors to retail sales growth this year, he said. He doubted the storm would have any negative effect on middle and upper income people.