November 1, 2012
Sandy storm damage could benefit construction in the long run
Airlines cancelled thousands of flights and stranded travellers. Insurers braced for damages of up to $5 billion. Retailers expected shrunken sales.
Hurricane Sandy is causing disruptions for companies, travellers and consumers. But for the overall economy, damage from the storm will likely be limited. And any economic growth lost to the storm in the short run will likely be restored once reconstruction begins, analysts say.
Preliminary estimates are that damage will range between $10 billion and $20 billion. That could top last year’s Hurricane Irene, which cost $15.8 billion.
If so, Hurricane Sandy would be among the 10 most costly hurricanes in U.S. history. But it would still be far below the worst — Hurricane Katrina, which cost $108 billion and caused 1,200 deaths in 2005.
“Assuming the storm simply disrupts things for a few days and it doesn’t do significant damage to infrastructure, then I don’t think it will have a significant national impact,” said Mark Zandi, chief economist at Moody’s Analytics.
The economic impact could be more severe if the storm damages a port or a major manufacturing facility such as an oil refinery, Zandi noted.
Here’s how the storm has begun to affect areas of the economy:
— Air travel in the U.S. Northeast was all but stopped for at least two days. Airlines cancelled more than 10,000 flights for Oct. 29 and Oct. 30 from Washington to Boston.
The disruptions spread across the nation and overseas, stranding passengers from Hong Kong to Europe. Carriers could suffer a short-term hit to earnings as they spend more to shuffle crews and planes.
— The nation’s major retailers are expected to lose billions of dollars, and the losses could extend into the crucial holiday shopping season.
Sales at department stores, clothing chains, jewelers and other sellers of non-essential goods are expected to suffer the most.
— Power outages and disruptions in major East Coast cities “may take a toll on demand unlike anything we have seen before,” Phil Flynn, a senior market analyst for Price Futures Group, wrote in a report.
Some of the biggest oil refineries in the Northeast were closed, and others were running at reduced capacity. As businesses closed and drivers staying home, demand for gasoline was expected to fall.
— The cost to insurers is expected to rival the insured damage from Hurricane Irene last year. Damage from Irene cost insurers roughly $5 billion, according to Sterne, Agee & Leach Research.
Because the storm is hitting a highly populous region, with “one of the highest concentrations of wealth in the world”’ the damages are likely to run into the billions, say analysts at Morgan Stanley.
Hurricanes, like other disasters, can cause big losses but also big spikes in economic activity, once homes and buildings are rebuilt or repaired. And Americans may spend more before the storm when they stock up on extra food, water and batteries. Spending can also rise afterward as households restock.
The overall economy expanded at an annual rate of two per cent in the July-September quarter. Zandi said he isn’t changing his forecast for similar growth in the current October-December quarter of 1.9 per cent.
Economic activity in October and November might slow if factory output declines and some workers are laid off temporarily and seek unemployment benefits. But the economy could strengthen in December as companies rebound.
CoreLogic, a private data provider, estimates that there are 284,000 homes worth about $88 billion in the hurricane’s path.
The airline cancellations have already surpassed those from Hurricane Irene last August and are on par with those from a major snowstorm that socked the East Coast early last year.
The Airports International Council, a trade group for airports worldwide, said that even if storm damage is minor, it could be a week before operations are normal at major East Coast airports.
THE ASSOCIATED PRESS
|MOST POPULAR STORIES|
- OPG $1 billion proposal to bury nuclear waste up for comment
- Hundreds of workers to be out of work as Caterpillar Inc. is set to close Toronto factory
- Proposed Ambassador Bridge twinning draws Windsor mayor’s ire
- Construction on pedestrian tunnel to Billy Bishop Airport continues to make progress
- Ontario prompt payment bill to get second reading today
- 20 Most Popular Stories
|TODAY’S TOP CONSTRUCTION PROJECTS|
These projects have been selected from 316 projects with a total value of $2,787,806,637 that Reed Construction Data Building Reports reported on Friday.
$90,000,000 Richmond Hill ON Prebid
$82,000,000 White River Twp ON Tenders
$40,650,000 Markham ON Prebid
- VIDEO: Economic Update May 21, 2013
- VIDEO: Competing in the trades
- Multi-employer approach needed in apprenticeships
- New Perspective
- ACEC’s input helps develop global engineering guidelines
- Clerk of works position gives peace of mind on projects
- World Trade Center developer’s plan for a 926-foot tower moving ahead
- Call for action after MOL says workers are responsible for their own safety
- Cold spring and weak construction hurt Deere’s 2013 predictions
- CanBIM reschedule June session
- More green roofs top Toronto buildings
- Witness recants testimony in Montreal corruption case
- Construction Site Arson
- Journal of Commerce Update for the week of May 20th, 2013
- Industry reacts to surprise B.C. Liberal majority
- Calgary Airport Tunnel
- Worker at centre of union sign up allegations speaks out
- Calgary program aims to get more people into the trades
- Midrise in the City
- Veterans battle barriers into the trades
- Government makes changes to online tendering
- SNC-Lavalin maintains that new bribery allegations have been resolved
- B.C. faces a tough battle for top talent
- Keyano College building state of the art training facility
- Essential skills can play a vital role in an apprentices' success
- Taking a closer look at the risks in green building for contractors
- Colleges conduct construction research in addition to teaching
- Skills Canada BC Competition
- Lower Mainland high school trades program is unique
- Construction Learning Forum aims to educate
- High schools looking for more industry participation
- Industrial construction supervisor program takes off
- Saskatchewan bill passed
- Edmonton garners support for regional cash for arena
- Feds pledge $5 million for Vimy memorial
|ALEX’S ECONOMICS BLOG|
Reed Construction Data Canada’s Chief Economist Alex Carrick discusses current developments in the North American economic environment with emphasis on the construction industry.
- An Overview of Prices and Sales in the Diverging U.S. and Canadian Housing Markets (April 25, 2013)
- Canada’s Precarious Dependence on the Commodity Price Super-Cycle (April 22, 2013)
- Twenty major upcoming residential and transportation terminal construction projects - April 2013 (April 15, 2013)