Storm to have small impact on US economy

Despite the path of devastation left by Hurricane Florence, its effect on the U.S. economy is likely to be modest.

The storm is projected to shave economic growth in the current quarter by one- to two-tenths of a percentage point, according to Moody’s Analytics, as residents forgo trips to the mall or restaurants and manufacturers temporarily shut down production.

That means an economy projected to grow a robust 3.9 percent in the current quarter could instead expand by a still healthy 3.7 percent.

The damage to homes, businesses and public infrastructure is expected to total $16 billion to $20 billion, Moody’s estimates. Such estimates are still in flux because of severe flooding that could last for days. Florence has killed at least 32 people and disrupted the lives of millions.

Oxford Economics expects the fallout could be more extensive. Florence could trim third-quarter growth by two- to three-tenths of a percentage point, Oxford's chief U.S. economist, Greg Daco, figures. And he estimates losses or damage to infrastructure of $30 billion to $40 billion. Either the Moody’s or Oxford estimate would still place Florence among the top 10 costliest hurricanes in U.S. history.

Most of the lost economic output is likely to be made up in the fourth quarter as consumers make purchases they deferred and replace damaged vehicles and repairs begin on effected homes and businesses.

Hurricanes Harvey (in Texas) and Irma (in Florida) last year sliced U.S. economic growth in the third quarter by about a half-percentage point. And the storms caused a whopping $180 billion in damage. Harvey struck Houston, heart of the nation’s energy industry. About 15 Texas oil refineries representing 25 percent of U.S. refining capacity shut down, pushing up gasoline prices.

The regions of the Carolinas affected by Florence make up about 1.1 percent of the nation’s gross domestic product, Moody’s says. Gasoline and diesel terminal racks in the Wilmington, North Carolina, area could feel some effects, but they’re likely to be limited, Moody’s economist Ryan Sweet says. Still, the two states, once centered on agriculture and textiles, have become bustling advanced manufacturing hubs.

How the economy could be affected:

❚ Retail and services: While purchases of items such as clothing, toys and jewelry scuttled by the hurricane will be made up in coming weeks or months, canceled visits to restaurants probably won’t, Daco says. Neither will some services, such as housecleaning, he says. Thousands of residents also will replace lost or damaged vehicles though that will likely fall far short of the more than 500,000 cars and trucks replaced after Hurricane Harvey, says Ian Shepherdson, chief economist of Pantheon Macroeconomics.

❚ Manufacturing: North Carolina is home to the nation's second-fastest growing aerospace sector and a cluster of biotech, information technology and energy companies. The storm is likely to trim industrial production, but the effect on the nation’s economic growth should be well under a tenth of a percentage point, Daco says.

❚ Tourism: The impact is likely to be small because the busy summer season is largely over, Sweet says.