Sandy may cost $50B as storm continues path
- 3 nuclear plants shut as a precaution
Wall Street remained shuttered Tuesday as post-tropical storm Sandy battered New York City for the second straight day, but by early evening the mayor said businesses were working to get things back on track.
Large parts of Manhattan were flooded by late Monday and early Tuesday. Water cascaded over several seawalls in lower Manhattan and a highway close to the island's east side was flooded.
The New York Stock Exchange, Nasdaq and CME exchanges remained closed Tuesday while officials tested contingency plans and backup systems, hoping to ensure trading can resume as normal later in the week.
New York City Mayor Michael Bloomberg said Tuesday evening that business in the city was "getting back to normal, at least, where there is electricity."
CNN and other U.S. media reported early Monday morning that the trading floor of the NYSE was under a metre of water.
But a spokesman for the exchange confirmed to CBC News that those reports were untrue. "[That] report was totally wrong," Ray Pellechia said. "No water at all in [the] building or surrounding streets."
By Tuesday afternoon, officials at NYSE had confirmed the exchange is on track to open Wednesday, but defended their initial caution in the matter. "It's a monumental event, and we take it very seriously," said Larry Leibowitz, NYSE's chief operating officer. "It's not a hyped-up drama."
The mayor said at a news conference Tuesday evening that the NYSE "clearly made the right decision in staying closed Monday and today in the interest of safety, and now it believes it's ready for normal operations."
At a Duane Reade drugstore a block or so away from the NYSE building, there were signs of life. One man was buying candles, scented, and asking for extra matches, as another walked out clutching a 12-pack of beer.
Airlines cancelled thousands of flights and stranded travellers, businesses face countless lost man-hours and lost sales, while insurers brace for billions in payouts.
All in all, the storm will likely end up causing about $20 billion in property damages and $10 billion to $30 billion more in lost business, according to IHS Global Insight, a forecasting firm.
That would cause a 0.6 percentage point hit to America's GDP this quarter, and top last year's $15.8 billion tally for Hurricane Irene. CoreLogic, a private data provider, estimates there are 284,000 homes worth about $88 billion in the hurricane's path, and about 7 million more have already lost power at some point.
If so, Hurricane Sandy would be among the 10 most costly hurricanes in U.S. history. But it would still be far below the worst — Hurricane Katrina, which cost $108 billion and caused 1,200 deaths in 2005.
"Assuming the storm simply disrupts things for a few days and it doesn't do significant damage to infrastructure, then I don't think it will have a significant national impact," Mark Zandi, chief economist at Moody's Analytics, said Monday.
Experts also note that while natural disasters often hit the economy in the short term, the rebuilding dollars that follow often stimulate the economy to come back stronger than it was before.
Spending to rebuild
"Whatever the magnitude of the economic drag in the near-term, it should prove temporary and result in a rebound in activity in future months," Toronto-Dominion bank economist Beata Caranci said.
Regardless, the storm is likely to make its presence felt in the coming months as more economic indicators trickle out.
"If Florida's hurricane Andrew was any indication, housing related indicators should show significant weakness in the next two to three months," Caranci said.
While some people will be prevented from working due to the damage, others will be required to work longer hours due to emergency and clean-up responses, as well as a potential shifting of production to other regions in the U.S., the bank notes.
"It will remain to be seen how long disruptions to electricity and infrastructure persist, as this could have a larger impact on small businesses, which are more sensitive to extended disruptions," TD said.
Here are some more ways the world's largest economy is being affected by the storm:
- Air travel in the Northeast is all but stopped for at least two days. Airlines cancelled more than 10,000 flights for Monday and Tuesday from Washington to Boston. The disruptions spread across the nation and overseas, stranding passengers from Hong Kong to Europe. Carriers could suffer a short-term hit to earnings as they spend more to shuffle crews and planes. The airline cancellations have already surpassed those from Hurricane Irene last August and are on par with those from a major snowstorm that socked the East Coast early last year.
- Three nuclear plants were shut down as a precaution, and authorities dispatched monitors to examine 11 others for signs of stress. The Salem Unit 1 in southern Delaware, Nine Mile Point and Indian Point 3 in N.Y. were all shuttered. The fear is that Sandy could disrupt the flow of water that the plants need to intake to stay cool, but as of yet there's no evidence that's happening.
- The nation's major retailers are expected to lose billions of dollars, and the losses could extend into the crucial holiday shopping season. Sales at department stores, clothing chains, jewellers and other sellers of non-essential goods are expected to suffer the most. "Retail sales could have a distorted pattern, with sales up for emergency supplies, food and construction materials, but weakness for many other discretionary items," Caranci noted.
- Power outages and disruptions in major East Coast cities "may take a toll on demand unlike anything we have seen before," Phil Flynn, a senior market analyst for Price Futures Group, wrote in a report. Some of the biggest oil refineries in the Northeast were closed, and others were running at reduced capacity. As businesses closed and drivers stayed home, demand for gasoline was expected to fall.
- The cost to insurers is expected to rival the insured damage from Hurricane Irene last year. Damage from Irene cost insurers roughly $5 billion, according to Sterne, Agee & Leach Research. Because the storm is hitting a highly populous region, with "one of the highest concentrations of wealth in the world," the damages are likely to run into the billions, say analysts at Morgan Stanley.
With files from The Associated Press