The economic impact of Sandy
by Liz Hester
With Hurricane Sandy, the latest phenomenon of nature, bearing down on the East Coast and wrecking havoc in the business world, it seemed like a good time to take a look at how business media covers storms.
It’s also the only thing anyone’s really talking or writing about, so I have little choice. As someone who recently left New York City for the quiet of North Carolina, it’s a bit odd to watch my friends suffer the suspense that many here consider a part of every October.
But, I digress. Sandy is massive, slow moving and likely to hit shore at high tide during a full moon creating huge storm surges Monday evening. She also closed down the stock and bond markets for at least two days and transit in much of the Northeast.
As the New York Times reported (Note: NYT was free for everyone online Monday) about the economic effect:
From the mighty New York Stock Exchange to local restaurants and retailers, businesses up and down the East Coast came to a halt Monday as the effects of Hurricane Sandy swept ashore.
Financial markets, department stores and many big companies on the East Coast announced plans to close Tuesday for the second day in a row. Unlike past hurricanes which blew through in a day or two, Hurricane Sandy’s fallout will be felt for much of the week, broadening the economic fallout.
Overall, total economic losses from the storm could be $10 billion to $20 billion, according to an analysis by Eqecat, a firm that performs catastrophe risk modeling for the insurance industry and government.
Reporter Nelson Schwartz also points out that Google delayed an event announcing a new smartphone among other products, Pfizer postponed its earnings announcement and many retailers closed up and down the East Coast.
Also from his story:
Oliver Chen, an analyst for Citi, wrote in a research note that he expected traffic to retailers could be down as much as 40 percent for the week in impacted areas, and November comparable-store sales could be hit by as much as 2 percent to 3 percent. However, he said, stores that sell emergency supplies, food and other staples should see an uptick in traffic and sales.
The business effects of the storm only added to the uncertainty pervading markets, economists said, with investors and executives already worried by the impending “fiscal cliff” in Washington as well as continuing economic problems in Europe and slowing growth in Asia.
The storm, which will deliver powerful wind gusts and heavy rains to the some of the most populous parts of the U.S., could cost the insurance industry between $5 billion and $10 billion, Eqecat estimated Monday.
At the high end of that range, Sandy would rank as the fifth-most expensive hurricane of all time, surpassing Hurricane Charley, which caused an inflation-adjusted $8.8 billion in insured losses when it struck Florida and the Carolinas in 2004.
Damage estimates from Eqecat and other disaster-modeling companies are closely tracked by the insurance industry for the early indication they can provide about the financial impact of major catastrophes on insurance-company capital.
Wall Street analysts that track the insurance industry say insurers will easily be able to absorb a loss of $5 billion to $10 billion. The 2012 hurricane season has been uneventful until now, and insurers are considered flush with cash.
Bloomberg TV preempted all other coverage to talk about the hurricane. In a non-scientific, random sampling of coverage, I saw: NOAA officials, executives of major companies including Jet Blue and the New York Stock Exchange, coverage of AT&T’s disaster center (and information about the cell phone networks), pictures from the New York and New Jersey region, as well as commentary on the political campaign. It was quite wide-ranging and informative.
Here’s an interesting story on home losses from Forbes:
Sandy is expected to trigger flooding, topple trees, cause power outages and damage buildings — including homes. Lots of them. Nearly 284,000 Mid-Atlantic homes valued at more than $87 billion are at risk for property damage, according to CoreLogic. The Irvine, Calif.-based research firm calculated its report based on storm surge flooding if Sandy hits the coast as a Category 1 hurricane.
CoreLogic estimates eight major metro areas located from Virginia to Massachusetts bear the highest risks, with a combined 238,000 properties valued at close to $75 billion. Perhaps not surprisingly, the densely populatedNew York metropolitan area, which includes northern New Jersey, Long island and Westchester, has 119,312 residences, valued at about $48 billion in total, at risk.
And then this on the markets from CNBC.com:
Dennis Gartman, who runs a hedge fund and authors the widely followed Gartman Letter, said that space, too, will be a mixed bag. (Read More: Sandy Also Could Wreak Havoc With Oil Refineries)
“If Sandy becomes truly untoward in the next 48 hours, we can imagine crude oil prices coming under pressure while gasoline, and particularly heading oil, race higher,” he said. “We can imagine the heating oil backwardation (future month prices lower than current) to become even more extreme than it already is, and we can imagine gasoline going backwardated out into the spring of next year rather easily. Indeed, we’d be surprised if it did not do so.”
It’s never pretty, but definitely gets coverage in a different class when a storm hits New York and Washington. Here’s hoping all those sandbags in Lower Manhattan do their jobs and that things can get back to normal soon.