Deadly storms will require lots of of rebuilding.
Two deadly hurricanes, Milton and Helene, put lots of people out of work and could add upward pressure to inflation, but the storms are unlikely to put a big dent in the growth of the U.S. economy.
Before Hurricane Helene devastated parts of the southeastern U.S. at the end of September, gross domestic product in the third quarter was tracking to show 3% annual growth. GDP is the official scorecard of the U.S. economy.
Helene arrived in the last few days of the third quarter, and the effects of the storm are not expected to shave any growth off GDP. The areas hit hardest, eastern Tennessee and western North Carolina, are also not densely populated centers of economic activity.
Hurricane Milton, on the other hand, made landfall on Oct. 9, early in the fourth quarter, and wreaked havoc on one of the largest and most populated states in the country.
Florida saw far fewer deaths than did the states inundated by rain during Helene, but its economy was brought almost to a standstill for several days.
How much Milton depresses fourth-quarter GDP, if at all, is still too soon to tell, economists say.
“There will be a noticeable impact on the data,” said senior economist Sam Bullard of Wells Fargo in Charlotte, N.C., which is less than two hours from the heavily damaged western part of North Carolina. “Right now, no one really knows at this point.”
It’s even possible, Wall Street DJIA 0.97% economists say, that GDP could get a bit of a boost from the storms.
That’s because GDP doesn’t take into account the loss of assets such as homes and businesses destroyed. It only counts things that are produced.
Lots of money was spent in preparation for the storms, economists point out. And even bigger piles of private and government cash are going to be plowed into rebuilding efforts. President Joe Biden said Friday that damage from Milton alone could be around $50 billion.
“These events sometimes have a positive effect in the sense of economic activity,” noted Eugenio Aleman, chief economist at Raymond James in St. Petersburg, Fla. “What is being captured by GDP is what is being built.”
Aleman has experienced multiple hurricanes, and he just got his electricity back himself. He noted that many people in Florida are not back at work yet. So the biggest immediate effect will be on the weekly and monthly figures on layoffs and job creation, he said.
Another potential negative could be a short-lived upward move in inflation.
The storms have temporarily disrupted the shipment of goods on the East Coast and could raises prices for certain goods — such as new cars, if there is a rush by people to replace damaged vehicles.
GDP figures don’t always go unscathed by major storms, of course. But only the most damaging ones, like Hurricane Katrina in 2005, leave a big imprint on the economy.
The Congressional Budget Office and the president’s Council of Economic Advisors estimated in 2006 that Katrina shaved 0.5 to 0.7 percentage points off GDP.
Katrina killed almost 1,400 people, kept hundreds of thousands of others out of work for months, shut down a major port and heavily damaged the U.S. oil and gas industry.
As bad as Helene and Milton were, they did not result in the same scale of physical destruction as Katrina.
The first read on fourth-quarter GDP won’t be released until the end of January, but economists say they will get a better idea of the storms’ impact in the next few weeks.
