Tags: Morici | Sandy | economic | damage

Morici: Sandy’s Economic Damage Will Be Hard to Measure, Boon Possible

Monday, 29 Oct 2012 11:37 AM

Hurricane Sandy will roar ashore as a post-tropical monster after a winter storm injects the system with energy and amps it up, inflicting devastating damage to property and the U.S. economy, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission.

Gauging the damage, however, will be more difficult than just tallying up the insurance claims.

Some areas of the economy, for example, will benefit.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

“Disasters can give the ailing construction sector a boost, and unleash smart reinvestment that actually improves stricken areas and the lives of those that survive intact,” Morici wrote in a CNBC guest blog.

“Ultimately, Americans, as they always seem to do, will emerge stronger in the wake of disaster and rebuild better — making a brighter future in the face of tragedy.”

Hurricane Irene walloped the Atlantic seaboard in 2011, inflicting damage estimated as high as $20 billion when factoring in residual effects to the economy such as missed workdays.

Sandy will be much worse.

“It seems likely that Sandy will impose greater destruction of property, and add to that the loss of about two days commercial activity, spread over a week across 25 percent of the economy, an initial estimate of the economic losses imposed by Sandy is about $35 to 45 billion,” Morici wrote.

“However, rebuilding after Sandy, especially in an economy with high unemployment and underused resources in the construction industry, will unleash at least $15-20 billion in new direct private spending — likely more as many folks rebuild larger than before, and the capital stock that emerges will prove more economically useful and productive.”

Regardless, losses of life and property are tragedies, though effective leadership that ensures rebuilding gets under way quickly could help the economy.

“Factoring in the multiplier effect of $15-20 billion spent rebuilding yields an economic benefit from reconstruction of about $27-36 billion,” Morici said.

“Add to that the gains from a more modern and productive capital stock — likely in the range of $10 billion — and consumer and business spending that is only delayed but not permanently lost — likely in the range of $12 billion — and the total effects of natural disasters of the scale of Sandy are not as devastating two years down the road,” Morici wrote.

Still, other economists agree that Sandy will cost the economy dearly by closing up commerce for millions of Americans.

“The big story this morning is how much stuff is shut down,” said Mark Vitner, senior economist with Wells Fargo Securities, according to CNNMoney.

“Business interruption is the biggest impact, at least until we see what happens in terms of property damage.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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Hurricane Sandy will roar ashore as a post-tropical monster after a winter storm injects the system with energy and amps it up, inflicting devastating damage to property and the U.S. economy, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland.
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Monday, 29 Oct 2012 11:37 AM
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