Harvey’s trail of costly destruction second only to Hurricane Katrina

With the shutdown of oil refineries and chemical plants, impaired roads and ports, and widespread damage to homes, businesses and cars, the economic toll from Hurricane Harvey is now being estimated as the second-costliest natural disaster in US history, trailing only the devastation caused by Hurricane Katrina in 2005.

Some economic researchers, including national forecasting firm Moody’s Analytics, have estimated the cost of Harvey at US$81 billion to US$108b (NZ$113b to $151b), most of that in damage to homes and commercial property.

That would be larger than the hit from Hurricane Sandy in 2012 but less than Katrina, which inflicted US$175b in damage and lost economic activity.

Although the brunt of Harvey’s cost will be borne in southeast Texas, particularly the Houston area, the broadly.

Motorists across the country can expect to pay more for fuel, at least for a while, and consumer spending overall could fall a bit as well.

US exports could drop because of the closure of the nation’s busiest ports.

All in all, Harvey is likely to sap some momentum from the American economy, which is its ninth effects will be felt more slightly one of year of expansion.

Depending on the degree and duration of impact, Harvey could shave 0.3 to 1.3 percentage points from third-quarter gross domestic product growth, according to Macroeconomic Advisers, a forecasting firm based in St Louis.

Some of that storm-induced drop is likely to be recovered later in the year as construction and repairs begin, largely funded by the government.

It remains to be seen how long it will be before businesses and workers can get back on their feet. The longer it takes, the bigger the blow to near-term economic growth, in lost wages, sales and consumer spending.

Based on what had been happening with wholesale petrol prices since Harvey, the national average for regular unleaded would hit US$2.60 (NZ$3.63) per gallon, compared with US$2.47 before the storms, said Ryan Sweet of Moody’s.

‘‘Prices could move even higher,’’ he said. While there was a bigger cushion in supplies than when Katrina hit, ‘‘damage to refineries is a serious risk and could cause gasoline inventories to fall more quickly’’.

Moody’s has estimated that as many as 700,000 vehicles and 400,000 homes were significantly damaged. Most homeowners did not have flood insurance, so their spending will be constrained.

When Harvey struck, the Houston economy was making a comeback from a slump last year caused by depressed oil prices. While the city has long been the nation’s oil capital, in recent years its economy has diversified, with a booming medical industry and a low-tax, low-cost climate that has made it a magnet for residents and businesses.