Hit creates Texas-size economic headache

AUSTIN, Texas — The destruction inflicted by Hurricane Harvey struck at the very heart of the Texas economy, shutting down one of the state’s largest shipping and distribution hubs, laying siege to the capital of its energy industry and pummeling some of its favorite tourist destinations.

While most of the economic damage will be temporary — and a massive influx of insurance, federal and other funding will flow in to rebuild — virtually every part of Texas will share at least some part of Harvey’s radiating pain, economists say.

Drillers in the Permian Basin will see the flow of oil back up as refineries sit flooded and idle. Farmers in the Panhandle will wonder when key export channels will reopen for the crops they’re harvesting now. State bean counters in Austin will have less sales, franchise and severance tax money to fund state budgets.

“The Houston area is roughly a quarter of the Texas economy,” said Ray Perryman, head of the Perryman Group, an economic consulting firm. “Add the other areas affected by this, and we’re looking at 30-plus percent of the Texas economy affected directly. ... It cuts a broad swath across everything that happens in Texas.”

Within Houston and the surrounding storm-stricken areas, the disaster will carry a heavy price in the short to middle term. Current estimates of the economic hit to Houston run anywhere from $30 billion to $50 billion and more. While the impact on local property values will vary in so large a metro area, aggregate values could drop as much as 15 percent or more as damage is assessed and flood maps are redrawn.

Beyond just its direct path, Harvey could become the most costly weather event in U.S. history, with an economic impact of $160 billion, according to an analysis by AccuWeather. That cost, about 0.8 percent of the U.S. gross domestic product, is similar to the combined effects of Hurricanes Katrina and Sandy, the firm said.