When Hurricane Sandy tore through the northeast in 2012, it left behind an estimated $72 billion in damages.
New York, alone, took a $33 billion economic hit forged by a two-day Wall Street shutdown, loss of 265,000 business properties and
2.2 million power outages.
This year, forecasters predict an above-normal hurricane season spanning June 1 to Nov. 30, which bodes well for next to no one,
not for East Coast and Gulf Americans and not for businesses with regional exposure.
Economic Impact
Economists offer four competing theories surrounding natural disasters and their effects on national economies. They either
result in permanent harm, temporarily delay growth, stimulate growth through restoration investments or accelerate growth by
eliminating previous limitations of poor infrastructure.
But according to a pair of scholars at Columbia University and the University of California Berkeley, cyclones, typhoons and
hurricanes are decidedly detrimental. The research team found that “each additional
meter per second of annual nationally-averaged wind exposure lowers per capita economic output 0.37 percent 20 years later.”
An event causing damage in the 90th percentile yields a 20-year, 7.4-percent reduction in per capita incomes.
"There is no creative destruction," economist Amir Jina told The Atlantic in 2014.
"These disasters hit us and [their effects] sit around for a couple of decades.”
The Losers
Among those expected to incur significant losses are property and casualty insurers, such as Allstate Corp (NYSE:
ALL), Travelers Companies Inc (NYSE: TRV), Chubb Ltd (NYSE: CB) and Progressive Corp (NYSE: PGR). The industry is vulnerable to weather-related events, with a series of storms
last summer
doubling Progressive’s year-over-year catastrophic losses in July, prompting an eight-fold spike in August and quintupling losses
in September.
Hurricane Katrina cost insurers $80 billion in property claims, while
Sandy, which damaged or destroyed about 150,000 insured vehicles in New York alone, cost upward of $20 billion.
Not only are homes and businesses lost, but so are crops. Last fall’s Louisiana floods cost an estimated $14.3 million in
rice fields, and past hurricanes crippled cotton,
corn and pecan harvests. The inventory cuts and delayed reapings have subsequent effects on the likes of Archer Daniels
Midland Company (NYSE: ADM) and Seaboard
Corp (NYSE: SEB), which process and market related
foods.
Flooded roads temporarily stun brick-and-mortar traffic, prompting losses for retailers and restaurants, alike. From
Costco Wholesale Corporation (NASDAQ: COST)
and Walgreens Boots Alliance Inc (NASDAQ: WBA) to any of the Yum! Brands, Inc. (NYSE: YUM) and DineEquity Inc (NYSE: DIN) chains, sales are prone to stumble.
Blocked routes also disrupt shipment services, such as local United Parcel Service, Inc. (NYSE: UPS) and FedEx Corporation (NYSE: FDX).
Inventory deliveries by J B Hunt Transport Services Inc (NASDAQ: JBHT) and peers are delayed. A holdup in Swift Transportation Co
(NYSE: SWFT), alone, can potentially set back clients
Wal-Mart Stores Inc (NYSE: WMT),
Target Corporation (NYSE: TGT), Dollar
Tree, Inc. (NASDAQ: DLTR) and Rite Aid
Corporation (NYSE: RAD).
Related Link: Natural
Gas Stocks Take Off Despite Calls For Warmer Weather
Gas prices soar and stunt oil-dependent industries. Ahead of Sandy, Hess Corp. (NYSE: HES) closed its New Jersey refinery and PBF
Energy Inc (NYSE: PBF) its plant, contributing to
local shortages and augmenting the effects of
gas station shutdowns. Katrina forced oil companies to evacuate 75 percent of manned platforms in the Gulf of Mexico to ultimately
cut oil production by about a third. In combination with Hurricane Rita, it demolished 113 offshore platforms and sent oil prices
soaring to about $5 per gallon.
Travel to and from the
affected region stalls, prompting flight cancellations for Delta Air Lines, Inc. (NYSE: DAL) and United Continental Holdings Inc (NYSE: UAL) along with cancelled reservations for Marriott International
Inc (NASDAQ: MAR) and Hilton Worldwide
Holdings Inc (NYSE: HLT).
Tourist spots also suffer. A Florida storm, for example, could crush daily ticket sales at Walt Disney Co
(NYSE: DIS) or SeaWorld Entertainment Inc
(NYSE: SEAS).
Even electronic entertainment declines as power outages cut cable access and kill regional television viewership.
The Winners
Not everyone loses, though, and even those ostensibly suffering sometimes benefit from the destruction.
For example, if restaurants remain open or offer delivery services, they may cater to consumers unable to cook from their
powerless homes. Trucking services may pick up extra cargo loads to serve the resource-exhausted region. And even as travel to and
from the region stalls, hotels gain strength among local residents unable to return home or seeking the comforts of
electricity.
While infrastructure projects are delayed or compromised, companies like Granite Construction Inc. (NYSE:
GVA) and Fluor Corporation (NEW) (NYSE:
FLR) secure post-storm renovation contracts and
relevant revenue.
Home improvement stores like Home Depot Inc (NYSE: HD) and Lowe’s Companies, Inc. (NYSE: LOW) gain pre-storm consumers stocking up on emergency supplies and post-storm
customers in need of property repair.
And, of course, Visa Inc (NYSE: V),
Mastercard Inc (NYSE: MA) and other financial
players capitalize
on the rising debt of storm victims making desperate and expensive purchases.
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