The folks at Moody’s have some back-of-the-envelope calculations of how much Frankenstorm will cost the U.S. economy, and they’re talking of “minor damage.” “Hurricane Sandy,” writes senior economist Ryan Sweet, ”will have a noticeable but temporary impact.” The lost economic output of the region directly in Sandy’s path, which includes New York and Washington D.C., amounts to $10 billion a day, he calculates. But, he adds: “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.”
Here in Canada, “the storm will impart a downward skew to many October, and possibly November, economic indicators,” BMO Nesbitt Burns senior economist Sal Guatieri said in note to clients.
Still, calculating the impact of bad weather on the economy is tricky. Sure, adding up the dollar figures of material damages is easy, but any calculation of how much income was lost by, say, shutting stores, offices and schools, and, as in Sandy’s case, even the stock market must necessarily start with a “what if” counterfactual analysis. And, according to Wells Fargo senior economist Mark Vitner, while business losses from a storm are normally smaller than the cost of physical damages, that might not be the case for Sandy, which is freezing economic activity in New York and other major east coast cities. As he told CNN, ”The big story this morning is how much stuff is shut down.”