Waves crash over Winthrop Shore Drive in Winthrop, Mass., on Oct. 29, 2012, as Hurricane Sandy approaches
Even before Hurricane Sandy made landfall on the East Coast of the U.S., economists were predicting that the historic storm would cause billions of dollars in damage across more than a dozen states where planes were grounded, stock exchanges were closed, public transportation was halted and homes began to get pounded by devastating wind and torrential rain.
By Monday, disaster-modeling company Eqecat estimated that Sandy would cause $5 billion to $10 billion in insured losses and $10 billion to $20 billion in economic damages. (In 2008, Hurricane Ike had similar economic damages at $20 billion.) Others have estimated as much as $100 billion in damages. The real cost is probably somewhere in the middle. For example, Peter Morici, a business professor at the University of Maryland, is estimating up to $45 billion in losses by comparing Sandy with Hurricane Irene when it hit the Northeast in 2011.
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The initial estimates last year for Irene were around $7 billion, but it eventually caused about $10 billion to $15 billion worth of damage. Morici says he’s predicting a similar increase from the estimate to the actual damages for Sandy considering the size of the storm, the number of Americans who will be affected (estimated around 60 million) and the possibility that metropolitan areas like New York City and Washington, D.C., could essentially be shut down for several days.
It’s possible that damage from Sandy could reach levels similar to that of the historic 1938 Long Island Express hurricane, which caused $47 billion in economic losses (in today’s dollars), killed hundreds of New Englanders and is considered the costliest storm in the region’s history.
Airports across the Mid-Atlantic region were closed beginning Sunday night and into Monday. Some estimated airline losses of $10 million a day, according to CNN. Others are estimating total losses for the industry at $450 million, as thousands of passengers will likely remain stranded through the week. Delta announced that all flights out of New York’s LaGuardia Airport would be canceled through Tuesday; United said it was grounding its planes at New York City’s three big airports through Tuesday; and American has canceled flights through midday Wednesday. Flight-tracker site flightaware.com has already tallied up some 10,000 flights that have been halted.
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For many parts of the East Coast, the biggest fear from Sandy isn’t necessarily rain, but wind. FEMA is estimating that wind damage to homes and businesses could cause $2 billion to $3 billion in economic losses alone. And that could cause power outages that could last for days or weeks that could then crimp economy activity.
Because the storm is shutting down some of the nation’s largest metropolitan areas — namely New York City and Washington — as well as their public-transportation systems, one analyst at Moody’s Analytics predicts that losses will be $10 billion a day, according to CNBC.
It’s also possible that oil prices could rise — and therefore gas prices — if any refineries along the East Coast are damaged or are shut down for a prolonged period. About 7% of U.S. oil capacity is located in the region, but any increase in gas prices is likely to be felt primarily in the Northeast rather than across the U.S.
Wall Street was shuttered Monday and faced the potential of being closed Tuesday as well, but most of the trading activity will be easily made up once the markets reopen. The last time the New York Stock Exchange was closed because of weather was in 1985 during Hurricane Gloria.
But Sandy isn’t bringing only bad economic news. Though the storm may hurt U.S. GDP in the near term, most analysts say they’re not predicting much of an effect. In fact, Sandy likely boosted consumer spending at supermarkets and retail stores in the run-up to its landfall as residents along the Mid-Atlantic stocked up on essentials. And the construction industry and home-improvement stores like Home Depot will likely see a significant uptick over the next several months as homeowners attempt to repair damage from the storm.
“Sandy will give the economy a jolt in November, but it’ll start to have a positive effect, and I think we will actually result in a GDP gain,” says Morici. He says he believes the number of homes in need of repair will significantly help a sector that generally sees a slowdown in the winter months and is predicting that the economic benefit of rebuilding could hit $36 billion.
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