Hurricane onslaught may blow hole in US economy

As hurricane Ivan roared northwards yesterday through the Gulf of Mexico towards landfall in the US as early as this evening, Wall Street analysts warned that the damage could extend into the wider economy.

As hurricane Ivan roared northwards yesterday through the Gulf of Mexico towards landfall in the US as early as this evening, Wall Street analysts warned that the damage could extend into the wider economy.

It has been 40 years since three serious hurricanes struck the US in a season and the economic impact on this occasion could be marked. Most experts predict a storm-related drop-off in GDP figures in the third and fourth quarters.

After increasing by $1.40 a barrel on Monday, oil prices were again rising yesterday, in part because of interrupted production. About a quarter of US oil and natural gas production is in the Gulf of Mexico. Most rigs and platforms have been evacuated.

David Kotok, the chief investment adviser at Cumberland Advisors, said that if Florida was hit by a third storm it would be felt across the US. Florida is the fourth-biggest state in terms of population and economic production. "In 2004, we are going to pay for the shock," he said. Agriculture, tourism and property development were predicted to be worst hit.

Hurricanes Charley and Frances caused up to $14bn (£8m) in insured property damage in Florida. Uninsured costs could be more than $20bn.

But Mr Kotok and other analysts said the storms might contribute to national growth in the first half of next year as the rebuilding effort in Florida gets into gear. An injection of federal aid will provide a further boost. President George Bush is expected to ask Congress to grant $2.5bn in emergency funds for Florida.

The effects on unemployment could be significant. When Hurricane Andrew struck in 1992, Florida's jobless rate was 9 per cent. A year later it had slipped to 7.4 per cent, largely because of rebuilding.

Ivan weakened as it moved into the cooler waters of the northern Gulf but, packing winds of up to 140mph, it remained a dangerous Category 4 storm on the five-step intensity scale.

In a swath from the western fringes of the Florida panhandle to New Orleans in Louisiana, with coastal Alabama and Mississippi in between, residents were frantically preparing for the storm. Residents of five Florida counties were under voluntary or mandatory orders to leave their homes.

Authorities in New Orleans urged residents to seek higher ground. "The city sits like a bowl," the mayor, Ray Nagin, told CNN. "If we get a storm like Ivan to hit us directly or come really close to us we could 12 to 18 feet of water throughout the city." The last time it took a direct hurricane hit was 1965, when Betsy swamped the city.

Hurricane Ivan was being blamed for 68 deaths across the Caribbean, with Grenada reporting the worst of the devastation.Reports from the Cayman Islands, a British territory, revealed extensive damage to hotels and private homes.

Tropical Storm Jeannemeanwhile strengthened yesterday, prompting a plea from Puerto Rico's governor for islanders to evacuate flood-prone areas. Residents flocked to supermarkets for supplies.

The storm was expected to hit its south-west coast this afternoon and some forecasters said it would by then be upgraded to a hurricane.