Economy Watch: Sandy’s Costs Already Being Guessed
- Oct 31, 2012
Sandy is still vexing parts of the Northeast with wind and rain, but it’s already time for preliminary damage estimates. Very preliminary, since the total costs of a natural disaster aren’t usually known for months or longer—and often economists disagree (as economists are wont to do) about the costs vs. the gains from re-construction. Hurricane Katrina, after all, did monumental damage, but also caused a mighty influx of spending.
In a widely cited early estimate, IHS Global Insight put the bill at as much as $50 billion. Some $20 billion of that would be in property damage, while as much as $30 billion in lost business income. To compare, Katrina caused an estimate $105.8 billion in property damage, while last year’s Irene, which also struck the Northeast, caused an estimated $15.8 billion in property damage, according to the National Hurricane Center.
Prognosticators are also bandying around estimates of the hurricane’s impact on U.S. GDP in the fourth quarter. Not everyone believes there will be much overall impact. “While natural disasters take a large initial toll on the economy, they usually generate some extra activity afterward,” Moody’s Analytics Ryan Sweet noted on economy.com, which is the company’s website. “We expect any lost output this week from Hurricane Sandy will be made up in subsequent weeks, minimizing the effect on fourth quarter GDP.”
Wall Street Re-emerges Today
Wall Street remained closed for a second day on Tuesday, but reopened today. It’s an important day for the exchanges, and not just psychologically, since on the last trading day of each month traders typically balance mutual fund portfolios and settle billions in futures and options contracts.
A number of IPOs slated for this week may or may not be delayed. Restoration Hardware, probably the best known of a half-dozen IPOs for the week, is still scheduled to price on Thursday night, according to Reuters.
S&P/Case-Shiller Indexes Showed Continued Upward Movement in U.S. Home Prices
The S&P/Case-Shiller indexes, which were released on Tuesday, showed continued upward movement in U.S. home prices. The 20-city composite index posted a 0.9 percent increase in August, following a 1.6 percent gain in July, while the 10-city composite likewise saw a 0.9 percent monthly increase. Annually, the 10- and 20-city indexes were up 1.3 percent and 2 percent, respectively.
Among the 20 metro markets tracked by Case-Shiller, all saw month-over-month increases except for Seattle, which was down 0.1 percent for the month, but the amount of growth in the other markets showed wide variety. Detroit saw the largest monthly price increase in August, with a gain of 2.3 percent, and Atlanta and Phoenix both experienced rises of 1.8 percent. Among the weakest markets that still showed, Dallas gained only 0.1 percent and Tampa was up 0.4 percent.
“Home prices continued climbing across the country in August,” David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, noted in a press statement. “The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market.”