Ida: Economists expect only slight storm hit to US economy
Economists say the impact of Hurricane Ida on the U.S. economy should be modest as long as damage estimates do not rise sharply and refinery shutdowns are not prolonged
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Your support makes all the difference.The impact of Hurricane Ida on the U.S. economy should be modest as long as damage estimates do not rise sharply and refinery shutdowns are not prolonged, economists said Sunday.
Mark Zandi, chief economist at Moody’s Analytics, said because of disruptions from Ida, he may trim his forecast for growth in the current third quarter by a few tenths of a percentage point but will add that loss back by boosting his estimate for fourth quarter growth to reflect rebuilding from the storm damage.
Zandi said he expects GDP to grow 6.5% in the second half of this year, matching the average growth seen in the first six months. He said in addition to Ida the other downside risk to the forecast is the delta variant of the coronavirus, which has caused daily cases to spike in recent weeks in many parts of the country.
“The key channel for Ida to impact the broader economy is through energy prices,” Zandi said. “We will have to see how much damaged occurred to production in the Gulf and how long that production will stay off line.”
There could be a brief spike in gasoline prices because of the production shutdowns but the increase in pump prices should last for only a few weeks, Zandi said.
“The worst case scenario is Ida might add 10 cents to 20 cents to the price of a gallon of gas through September,” Zandi said. “That would be consistent with what has happened in the past when we have had bad storms blow through Louisiana ”
Brian Bethune, an economist at Boston College also said a brief spike of up to 20 cents per gallon for gas was likely but cautioned that the price increase could be more severe, depending on how long the production shutdowns last and whether various regions have alternative supplies.
He noted that after the hack of the Colonial Pipeline earlier this year, some states saw prices rise sharply as service stations ran out of gas.
The government recently raised its estimate of GDP growth in the April-June quarter to an annual rate of 6.6% after a 6.3% growth rate in the first quarter.
S&P Global Platts said Sunday that government statistics show that 95% of oil and gas production in the Gulf Coast region was shut down as Ida made landfall.
In addition, Platts said that close to 4.4 million barrels per day of operating refinery capacity in the path of Ida, primarily in Louisiana, was taken offline before Ida came ashore.
“Many plants have been hardened against hurricanes but disruptions in operations are still very likely due to flooding, power outages and personnel dislocations,” Platts analysts said.