Hurricane Sandy’s economic toll is poised to exceed $20 billion after the biggest Atlantic storm slammed into the Eastern U.S., damaging homes and offices and flooding subways in America’s most populated city.
The total would include insured losses of about $7 billion to $8 billion, said Charles Watson, research and development director at Kinetic Analysis Corp., a hazard-research company in Silver Spring, Maryland. Much of the remaining tab will be picked up by cities and states to repair infrastructure, such as New York City’s subways and tunnels, he said.
“I think it is disproportionate going into the public sector side,” Watson said by telephone. The real extent of the damage won’t be known until the flood recedes and workers can inspect subway and utility tunnels.
Sandy, spanning 900 miles, slammed into southern New Jersey at about 8 p.m. New York time and brought a record storm surge of 13.88 feet (4.2 meters) into Manhattan’s Battery Park. U.S. airlines have grounded about 12,500 flights, stranding travelers, and U.S. stock trading is closed again today in the first back-to-back shutdown for weather since 1888.
Record tides from the storm combined with hours of pounding wind and rain to flood electrical substations and shut down New York’s financial district. Consolidated Edison Inc., the city’s utility, killed power last night to parts of downtown Manhattan, including Wall Street, and Brooklyn, as the storm surge, boosted by high tide, sent saltwater pouring into its underground power network.
Before Sandy made landfall, the storm had knocked out power to more than 2.1 million homes and businesses from North Carolina to New Hampshire, according to utility reports. Power blackouts may eventually affect as many as 10 million people in the region for as long as 10 days.
Heavy losses to public infrastructure would in some ways mirror the effects of Hurricane Katrina, which flooded New Orleans in 2005, Watson said. Katrina was the nation’s most costly natural disaster with an estimated $41.1 billion in insured property losses, according to the Insurance Information Institute.
“It kind of reminds me of Katrina, the actual wind damage from Katrina and coastal storm surge damage was easy to pull down,” Watson said. “But once you start getting water going over your protective measures and getting into your infrastructure the numbers start to go crazy.”
Earlier, Eqecat Inc., an Oakland, California-based provider of catastrophic risk models, estimated Sandy would cause as much as $20 billion of economic damage with about $5 billion to $10 billion of that in insured losses.
With Sandy set to continue as a non-tropical storm throughout New England over the next several days, economists and analysts have varying estimates on the potential damage.
Sandy ultimately may subtract 0.1 to 0.2 percentage points from U.S. gross domestic product in the fourth quarter as spending drops on services such as restaurant meals, according to Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. The economy, with annualized GDP of $13.6 trillion, expanded at a 2 percent pace in the third quarter.
“There’s a loss of activity that’s going to be hard to make up,” Vitner said yesterday. “If you’re a restaurant and you’re closed today, people are not going to eat two lunches tomorrow.”
Floodwaters at New York’s John F. Kennedy International Airport forced it to close late yesterday until further notice. The region’s other two major airports, Newark Liberty International and LaGuardia, are also closed.
Sandy grounded 15 percent of U.S. flights from Oct. 27 through late yesterday, according to data compiled by industry researcher FlightStats.
Boeing Co., the world’s largest aerospace and defense company, suspended operations at sites in Virginia, Maryland, New Jersey and Pennsylvania and will determine plans for the remainder of the week on a day-to-day basis. The shutdown includes Chicago-based Boeing’s plant near Philadelphia, where about 6,000 employees build H-47 Chinook helicopters and V-22 Ospreys.
Phillips 66 shut down its refinery in Linden, New Jersey, and Hess Corp. closed a facility in Port Reading, New Jersey, the Energy Department said. The Hess facility doesn’t process crude oil. Other refineries in New Jersey, Pennsylvania and Delaware reduced output, according to the department.
Exxon Mobil Corp., NuStar Energy LP, Phillips 66 and Hess closed energy terminals they operate in New York, Connecticut, Massachusetts, Rhode Island, New Jersey, Virginia and Maryland, according to the Energy Department.
There’s still a chance the storm will have little discernible impact on GDP, other forecasters said.
“Generally there’s a disruption effect and a rebuilding effect,” said Mike Englund, chief economist at Action Economics in Boulder, Colorado. “The disruption effect should last about a week, and the rebuilding effect the following three or four weeks. On net, the rebuilding effect exceeds the disruption effect, but only by a small amount. So we might find by the end of the fourth quarter repair would be a small positive.”
Sandy may cut into sales of clothing and accessories as the holiday shopping season nears, according to Oliver Chen, an analyst at Citigroup Inc. in New York. The storm may reduce November same-store sales by as much as 3 percent as traffic may fall 40 percent in storm-affected areas in November’s first week, which accounts for about 22 percent of the month’s sales, Chen said in a note.
Consumers who can’t shop in stores because of storm closings may shift to online spending, according to Gil Luria, an analyst at Wedbush Securities in Los Angeles. A shift of one percentage point of revenue to online retailers due to the hurricane would boost fourth-quarter online sales by roughly that much, Luria said by e-mail.
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