Today's Daily Economic Notes from Deutsche Bank's Joe LaVorgna focuses on the effects of Sandy, and he writes estimates of the storm's costs have climbed to the $30B-$50B range.
But that's not the whole story.
The storm may on balance end up raising GDP as residents purchase rebuilding materials and businesses replenish lost inventory.
Indeed, he shows that in the quarters during which hurricanes Andrew ($54B cost) and Katrina ($81B cost) hit, GDP increased an average of 3.7 percent, and 3.2 percent for the following quarter.
Here's his breakdown of the average gain for selected monthly data in the quarter following the storms
- Retail sales +0.6 percent
- Industrial production +0.8 percent
- Nonfarm payrolls +129K
He concludes two things:
One, there is no consistent pattern on [jobless] claims, which can move either up or down following the hurricane. Two, monthly indicators of activity (i.e., retail sales, production and employment) are negatively impacted by the storm, but the impact is temporary.
He says next Empire State and Philly PMI data, released next Thursday, will provide the earliest indicator of whether this pattern will continue for Sandy.
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