A double whammy of hurricanes could slow US economy

Reuters

White House homeland security advisor Tom Bossert said it could take weeks before power is restored in Florida after Hurricane Irma.

While tropical storm Irma is weakening as it swirls beyond Florida, there are concerns the double whammy of that and Hurricane Harvey could derail the US economy.

Irma is currently tracking north through America, and has killed at least two people in Georgia, flooding the coast, sending trees crashing onto homes and forcing the world's busiest airport in Atlanta to cancel hundreds of flights.

The former hurricane remained an immense, 668km wide storm as its centre moved on from Florida giving its still-formidable gusts and drenching rains a far reach. Some 540,000 people were ordered to evacuate days earlier from Savannah and the rest of Georgia's coast.

Wrecked boats that have come ashore are pictured in Coconut Grove following Hurricane Irma in Miami, Florida
CARLO ALLEGRI

Wrecked boats that have come ashore are pictured in Coconut Grove following Hurricane Irma in Miami, Florida

Irma sent more than a metre of ocean water into downtown Charleston, South Carolina, as the storm's centre passed 400km away. In Atlanta, people nervously watched towering oak trees as the city, 400km inland, experienced its first tropical storm warning. The storm is due to hit Alabama next.

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However, with businesses disrupted, fuel and chemical refineries out of commission and consumers struggling to restore their lives, Hurricanes Harvey and Irma could signal turbulent times for the US economy.

Debris from storm surge near the Puerto Chico Harbor during the passing of Hurricane Irma
Jose Jimenez / Getty

Debris from storm surge near the Puerto Chico Harbor during the passing of Hurricane Irma

Nearly one-fifth of the nation's oil refining capacity has been shut down because of Harvey, and fuel production has dropped sharply as a result, according to Bank of America Merrill Lynch. Consumers will also spend less in the immediate aftermath of the storms. Even those ready to make purchases will face closed store fronts and dark restaurants. 

Irma will cause tourists to delay - and in many cases never take - trips to Florida's beaches or Disney World. Chemical refineries have also been closed, reducing the production of plastics.

Damage estimates from the two storms are still early, particularly for Irma. Hurricane Harvey will likely cost up to US$108 billion (NZ$148.7b), according to Bank of America Merrill Lynch, which would make it the second-most- expensive hurricane after Katrina. Mark Zandi, chief economist for Moody's Analytics, estimates that Irma will cause US$64 billion to US$92 billion in damage.

Hurricane Irma storms towards Florida, passing the eastern end of Cuba. Hurricane Katia is also seen to the left of the ...
NASA

Hurricane Irma storms towards Florida, passing the eastern end of Cuba. Hurricane Katia is also seen to the left of the image, in the Gulf of Mexico.

While the economic toll pales beside the human costs, analysts estimate that the nation's annualised growth rate will be one-half to one full percentage point slower in the July-September quarter than it would otherwise have been.

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But repair work, reconstruction and purchases of replacement cars and other goods should provide an offsetting boost later this year and in early 2018.

"Construction activity will rocket in the affected areas," predicted Ian Shepherdson, chief economist at Pantheon Macro-economics. "Households' spending on building materials, furniture, appliances, and vehicles will all be much higher than otherwise would have been the case."

Evacuees are loaded in a Royal Netherland Air Force plane bound to Curacao at Princess Juliana Airport on September 11, ...
Jose Jimenez/ Getty

Evacuees are loaded in a Royal Netherland Air Force plane bound to Curacao at Princess Juliana Airport on September 11, 2017 in St. Maarten.

More than 7 million people have lost power because of Irma, with most of them living in Florida. The state makes up about 5 per cent of the US economy. Flooding from Irma could affect about US$1.2b of the state's crops, Bank of America Merrill Lynch estimates, and elevate food prices. With oil refineries along the Gulf Coast shut down, petrol prices have jumped about US30 cents a gallon nationwide, on average, since Harvey made landfall in late August. That will temporarily reduce Americans' spending power because they will have less money to spend on other items.

The impact of Harvey has been particularly harsh in Houston, the nation's fourth-largest city. The entire metro area accounts for about 3.2 per cent of the nation's economy.

Higher petrol costs will likely increase measures of inflation in the coming months, economists say, but the rise will likely be small and temporary.

A senior White House official touted the response of the US military to Irma's long path of destruction as a superlative.

Tom Bossert, President Donald Trump's homeland security adviser, said during a news briefing that the Pentagon had put together "the largest-ever mobilisation of our military in a naval and Marine operation". He added that "an Air Force carrier" also had been deployed in the effort, and that the ship's involvement in the relief effort was historic.

"This is the first ever as well," Bossert said of the carrier deployment, the USS Abraham Lincoln, which actually is operated by the Navy, not the Air Force. "So we have the largest flotilla operation in our nation's history to help not only the people of Puerto Rico, people of the US Virgin Islands, but also St. Maarten and other non-US islands affected and the people of Florida."

The US military's naval response to Irma - which savaged the US Virgin Islands and other Caribbean Islands as a Category 5 hurricane last week - is certainly sprawling. The Pentagon has deployed at least eight others ships in addition to the Abraham Lincoln to help with Irma relief, providing dozens of helicopters and thousands of US Marines and sailors to assist.

The other services also are all involved, with the Army deploying thousands of soldiers in helicopters and high-water vehicles and the Air Force and Coast Guard running missions that include dangerous search-and-rescue operations. The Pentagon said in a statement that it has 10,400 service members involved in Irma relief in the Southeast, and another 4600 involved for the Virgin Islands and Puerto Rico.

Meanwhile, in the Caribbean, the recovery is continuing ahead of the threat of another hurricane looming ever closer.

Ten people are reported dead in Cuba and now Hurricane Jose is constantly being monitored. The National Hurricane Center said it was passing well northeast of the Turks and Caicos Islands and was expected to turn toward the northeast Monday night. There were no coastal watches or warnings in effect.

The death toll for the Caribbean now stands at at least 34. Seven of the deaths came in Havana, where two young women riding in a bus were killed when a fourth-story balcony crashed off a Central Havana building into the vehicle. Three other Cubans were killed in coastal provinces when they failed to heed evacuation orders and their homes collapsed.

Agencies

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