CHART OF THE WEEK
Hurricane Harvey hit the Houston region of Texas on August 26th. It is estimated that Harvey has caused more damage than Sandy (2012) but less than Katrina (2005) and will cost around $100 billion. Greater Houston accounts for just under 3% of US GDP, which is considerably more than New Orleans (hit by Katrina) but three times less than New York (hit by Sandy). Weekly jobless claims are the first indicators of the impact that superstorms have on the economy. The effects of Hurricane Harvey seem comparable with those of Sandy and Katrina. Hurricane Irma, which has hit Florida, should also impact data.
OUR ANALYSIS
Natural disasters of this scale often have an initial negative short-term impact on the economy as a result of related damages and economic disruption in the affected area, followed by a recovery that generally starts within just a few weeks. Subsequently, the rebuilding effort can be a boost to business and the initial negative impact on GDP is replaced by faster growth in subsequent quarters. As shown in the graph above, weekly jobless claims take about two months to return to pre-hurricane levels. Although the impact of such disasters on upcoming economic data is unpredictable and hard to gauge, it should be temporary.
The opinion expressed above is dated 12th September 2017 and is liable to change.
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