The Economics of Hurricane Sandy: Money and Weather

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Hurricane Sandy has left many areas flooded. Image credit: Betty Flowers

Hurricane Sandy: Potential Costs

Sandy made landfall as a Category 1 hurricane, with maximum sustained winds of 90 miles per hour. Despite its relative lack of punch as compared to the other storms listed above, it became a “superstorm” by combining with a cold front and thus became the largest Atlantic storm on record, stretching approximately 1,100 miles across.

Its size, coupled with it striking in a densely-populated  area as well as propelling a massive storm surge, created the potential for near-record damages.

Mark Zandi, the chief economist of Moody’s Analytics, has predicted that Sandy will exceed the $12-$16 billion incurred by Hurricane Irene in August, 2011.

Equcat, a company specializing in helping companies manage business risk due to catastrophic events, has estimated somewhere between $10-$20 billion in overall damages. Both estimates would put Sandy amongst the top-five most expensive hurricanes in history.

Neither compare to the prediction made by Peter Morici, an economics professor at the University of Maryland’s Smith School of Business. His estimate of the total monetary impact of Sandy is between $35-$45 billion, which would place it just outside the total recorded by Katrina.

Weather Damage: U.S. Economic Impact

Over time, the damages will be repaired. In fact, the construction industry will see a boost as a result. However, Zandi said, “Assuming the storm creates havoc for no more than a few days, there should be little impact on fourth-quarter GDP.” Zandi has not changed his estimate of a 1.9% annualized growth rate through the rest of 2012.

Hurricanes and Natural Disasters: The Big Picture

Hurricane Katrina’s track – Image credit: NOAA.

Hurricanes, of course, are very difficult to predict with any degree of certainty, and Sandy is no exception. They devastate lives as well as property, and are to be treated with the ultimate of respect. As Louisiana governor Bobby Jindal once said, “Louisiana loses 30 miles a year off our coast. We lost 100 miles last year thanks to Hurricanes Katrina and Rita. We have lost a size of land equivalent to the entire state of Rhode Island.”

That’s one big picture.

Resources

CNBC. 10 Most Expensive Hurricanes in U.S. History. (2012). Accessed on October 30, 2012.

ThinkExist.com.Dr. Carl Sagan Quotes. (2012). Accessed on October 30, 2012.

National Oceanographic and Atmospheric Administration. Service Assessment: Hurricane Charley, August 9-15, 2004. (2006). Accessed on October 30, 2012.

National Oceanographic and Atmospheric Administration. Hurricanes in History. (2012). Accessed on October 30, 2012.

National Oceanographic and Atmospheric Administration. Houston/Galveston, TX. (2012). Accessed on October 30, 2012.

National Oceanographic and Atmospheric Administration. Hurricane Andrew 1992. (2012). Accessed on October 30, 2012.

National Oceanographic and Atmospheric Administration. Hurricane Katrina. (2012). Accessed on October 30, 2012.

Eqecat. Hurricane Sandy. (2012). Accessed on October 30, 2012.

Davidson, Paul, O’Donnell, Jayne, and Schmit, Julie. What will be Sandy’s effect on economy? (2012). USA Today. Accessed on October 30, 2012.

BrainyQuotes. Hurricane Quotes. (2012). Accessed on October 30, 2012.

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