Harvey is smashing 3% worth of the US economy.
Investment bank Citi points out in a note to clients that just one week of zero economic output in the affected regions of Texas and Louisiana can shave 0.06 percentage points off the American GDP. This may not seem like much. But Citi says if you look at a quarter-on-quarter annualized basis, it would reduce national economic growth in Q3 by 0.2-0.3 percentage points. The affected area normally accounts for more than 3% of the GDP:
|Affected Area||GDP (% of total US)||Employment (% of total US)|
|Corpus Christi – Kingsville – Alice||$23 bn (0.1%)||259,000 (0.2%)|
|Victoria – Port Lavaca||$5 bn (0%)||58,000 (0%)|
|Houston – The Woodlands||$503 bn (2.8%)||4,015,000 (2.8%)|
|Beaumont-Port Arthur||$25 bn (0.1%)||214,000 (0.1%)|
|Lake Charles – Jennings||$15 bn (0.1%)||128,000 (0.1%)|
|Total affected||$571 bn (3.1%)||4,673,000 (3.3%)|
Insurance consultants estimated storm-related property destruction will amount to $20 billion alone, which is 0.1% of the economy, says Citi. Coupled with the production outage, the bank’s baseline scenario is that GDP will only grow slightly in the fourth quarter this year and the first quarter in 2018, even if there some recovery in production in the remainder of September.
It’s important to remember that this scenario is based only on the assumption of one week of zero output.
Citi warns that “the output reduction could be greater if the disruption is longer lasting or if there are larger knock-on effects outside the region. For instance, stoppages at oil refineries could curtail activity further down the supply line.”
Elsewhere, private weather firm AccuWeather said that Harvey is set to be the costliest natural disaster in US history, equalling the cost of both Hurricane Katrina and Sandy, at $160 billion. This figure represents a 0.8% hit to the US economy overall.