Hurricane Sandy and the Economy:
The Lesson from Katrina

By Doug Short
November 16, 2012

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In studying the data for my latest Big Four Economic Indicators update, I wondered how much impact Hurricane Sandy might have had on the economy in October and what to expect in the months ahead. I thought it would be interesting to take a close look at the behavior of the Big Four in the months before and after Hurricane Katrina hit the coast in August 2005.

Here is a chart and table similar to the one I maintain for the current Big Four data. The chart illustrates the growth of the four indicators from January 2005 to June 2007. The table below shows the month-over-month percent change and the average of the four for the twelve months of 2005.

The two made landfall at the end of the month Katrina on August 29th and Sandy on October 29th. Both had effects on economic activity as they approached the US. Katrina certainly had some impact on the August data and substantial impact on the September data for all four indicators, most conspicuously Industrial Production. But we can see that Industrial Production had essentially rebounded by November and was back on trend by the end of the year. Retail Sales took a storm-related dip, but this series is such a volatile indicator that it's impossible to speculate with any confidence what the green line in the chart above would have looked like had Katrina never happened.

For the sake of comparison, here is my current chart for the same indicators.

Presumably we have already seen some of Sandy's fingerprints on the three October indicators thus far released, and we should expect to see greater impact on the November data. But the gradual return to normal in the North East and economic stimulus from recovery efforts should limit the Sandy effect to a couple of months.

 

 

 

 

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