This story was last updated at 4:05 p.m. on Wednesday, October 31.
Hurricane Sandy, one of the worst storms ever to hit the U.S., has already halted business activity, shuttered shops and forced the closure of the stock and commodity markets for two days, but the havoc it wreaked is likely to last for days, if not weeks – and the full economic impact may take much longer to assess.
As the winds die down and the storm surge recedes it’s clear, though, that the superstorm will be remembered as one of the costliest in the country’s history – but analysts expect the economic shock to be temporary, and relatively short-lived. “Hurricane Sandy will have a noticeable but temporary impact on the U.S. economy,” economist Ryan Sweet of Moody’s Analytics wrote in a research note published Monday. “While natural disasters take a large initial toll on the economy, they usually generate some extra activity afterward. We expect any lost output this week from Hurricane Sandy will be made up in subsequent weeks, minimizing the effect on fourth quarter GDP.”
The toll from Hurricane Katrina in 2005, the worst natural disaster in U.S. history, totaled a reported $108 billion. Hurricane Irene, which hammered the Northeast just over a year ago, left up to $20 billion worth of destruction in its wake. The costs associated with Sandy could still be higher. Across seven states, nearly 284,000 homes valued at almost $88 billion were at risk from the storm, real-estate tracking firm CoreLogic said on Saturday. Eqecat, Inc., a catastrophe-modeling company, estimated that the storm could result in economic losses between $10 and $20 billion, with insurers facing costs between $5 billion and $10 billion. Insurers' tab for Katrina, by contrast, ran to nearly $47 billion.
The superstorm, reclassified from a hurricane to a post-tropical cyclone, made landfall around 8 p.m. on the New Jersey coastline near Atlantic City, but its effects were felt across some 15 states and the District of Columbia, including a hard-hit 10-state swath that is reportedly home to about 20 percent of the country’s population and accounts for about 15 percent of the U.S. economy. The damage wrought by the immense storm surge and hurricane-force winds left more than 8 million without power, according to the Department of Energy. By early Wednesday, more than 6 million people were still suffering outages. At least 62 people were killed.
President Obama on Tuesday declared parts of New York, New Jersey and Connecticut major disaster areas, making them eligible for direct federal financial assistance for individuals. The president also authorized "emergency declarations" for states from West Virginia to New Hampshire, providing $5 million or more in federal help to those states.
In New York City, the Brooklyn-Battery Tunnel and critical portions of the subway system flooded, potentially forcing an extended shutdown of a mass transit network that transports more than 5 million passengers a day. “The New York City subway system is 108 years old, but it has never faced a disaster as devastating as what we experienced last night,” Metropolitan Transportation Authorty chairman Joseph J. Lhota said in a statement released overnight, adding that, “our employees have never faced a challenge like the one that confronts us now.”
A days-long delay in restoring the city’s transportation system could further weigh on economic activity in the New York metropolitan area, the largest regional economy in the country. The New York area added $1.288 trillion to the economy last year, or more than $3.5 billion a day, according to a report (PDF) prepared by IHS Global Insight for The U.S. Conference of Mayors.
The New York Stock Exchange, the Nasdaq stock market and the BATS electronic exchange are all closed again Tuesday, as is the bond market. The last time the NYSE suffered an unplanned closure was after the 9/11 attacks back in 2001. The last time weather forced the exchange to close was Hurricane Gloria in 1985, and the exchange hadn’t been shut multiple days due to weather since 1888. The NYSE plans to resume normal trading on Wednesday – an important day for traders as it’s the last day of the month, and marks the end of the fiscal year for mutual funds. "Our building and systems were not damaged and our people have been working diligently to ensure that we have a smooth opening tomorrow," Duncan Niederauer, the CEO of exchange operator NYSE Euronext said in a statement Tuesday.
Here’s a look at how the storm affected several areas of the economy:
Retail: Northeastern stores and restaurants of all kinds closed their doors in anticipation of the storm. The chains affected included Best Buy, Bloomingdales, Kmart, Macy’s, Sears and Target, among others. Walmart said that it had closed as many as 294 stores, clubs and distribution centers. Late October isn’t a peak shopping time, but the National Retail Federation had expected Halloween spending to reach $8 billion. The storm might have disrupted some of those last-minute sales.
But some of the sales, productivity and income lost to the storm was countered by increased activity in advance of its reaching land. Call it the Sandy stimulus. As anyone who visited a supermarket or convenience store in New York City this weekend could tell you, the hurricane also generated, or pulled forward, a considerable amount of economic activity as people in the path of the storm loaded up on everything from flashlights and batteries to water, cigarettes and, for some reason, frozen pizzas. And chains like Walmart, Home and Lowe’s could also see additional sales gains now that the worst of the storm has passed and homeowners begin cleaning up and repairing the damage. But any purchases required after the storm could also force shoppers to cut back on other spending for the holiday season, a crucial period for retailers.
Transportation: Travel in the Northeast all but stopped as highways, railways and airports were closed. As of Wednesday morning, more than 19,500 flights had been canceled for Sunday, Monday and Tuesday, according to tracking site FlightAware.com. Amtrak canceled all service in the Northeast Corridor through Tuesday and freight rail giant CSX shut down its East Coast train network from Richmond, Virginia to Albany, New York. The Port of New York and New Jersey was also shut down, and trucking company YRC Worldwide reportedly also halted operations in the region.
Energy: The storm also threatened five crude oil refineries and one gas oil refinery along the East Coast. The U.S. Department of Energy said Monday afternoon that just over a quarter of the 1.17 million barrels a day in refining capacity had been shut down. But analysts said that any spike in gas prices would likely be temporary and the lost production should be largely offset by the reduction in road traffic due to the storm, according to John Kilduff of Again Capital in Platts Oilgram News. “Over the years, these disruptions are usually bearish for oil and refined products, but equities can get a lift due to the fact that the necessary rebuilding and replacement of vehicles can be somewhat stimulative,” Kilduff said.
Economic Data: The hurricane also disrupted economic and corporate earnings releases, and it is likely to distort data about the economy over the coming weeks. The much anticipated October jobs report, due to be released on Friday morning – just four days before the presidential election – won't be affected, the Labor Department said. On the other hand, the Conference Board pushed back the release of its consumer confidence index from Tuesday to Thursday. And dozens of companies including Avon, Delphi, Hertz, Hess, McGraw-Hill, Office Depot and Time Warner rescheduled their quarterly earnings announcements.
View our photo gallery of disaster photos here.