Sandy left economic wallop in its wake
Friday, November 30, 2012
WASHINGTON -- Superstorm Sandy packed a bigger economic punch than most people had thought.
On Thursday, Kohl's, Target and Macy's blamed the storm for weak sales in November. Macy's and Nord-strom Inc. reported their first monthly sales drop since late 2009, when the U.S. economy was emerging from the recession.
Eighteen retailers reported that November sales at stores open at least a year -- an indicator of a retailer's health -- through last Saturday were up 1.7 percent compared with the year-ago period, according to the International Council of Shopping Centers. That's well below the group's anticipated forecast for a 4.5 percent to 5.5 percent gain.
Only a small group of stores representing about 13 percent of the $2.4 trillion U.S. retail industry report monthly revenue, and the list excludes big merchants such as Wal-Mart Stores Inc., the world's biggest retailer. But the data still offers a snapshot of consumer spending, which accounts for 70 percent of all economic activity.
November sales show that stores were challenged by the impact of Sandy, which hit the Northeast on Oct. 29 and disrupted business activity and households for several days. MasterCard Advisors' SpendingPulse, which tracks spending, said that Sandy knocked off nearly $4 billion of retail sales the first week in November in the hard-hit Mid-Atlantic and Northeast region, which accounts for 24 percent of retail sales nationwide.
Sandy caused about $62 billion in damage and other losses in the U.S., mostly in New York and New Jersey. It's the second-costliest storm in U.S. history after Hurricane Katrina, which caused $128 billion in damage in inflation-adjusted dollars.
New York is seeking $42 billion in federal aid, including about $9 billion for projects to head off damage in future storms. New Jersey is seeking nearly $37 billion in aid, including $7.4 billion for future projects.
Reports this week showed economic damage confined mainly to the Northeast. In other parts of the country, the economy picked up in early November when many New Yorkers still were without power.
Rebuilding efforts in the Northeast could help jump-start the broader U.S. economy. That's especially true if Congress and the White House reach a budget deal that prevents sharp tax increases and spending cuts from taking effect in January.
Homes must be rebuilt, cars need to be replaced and many people are likely to step up spending once the storm's impact starts to fade. All that would help accelerate growth.
Applications for unemployment benefits rose to an 18-month high in the first week of November, driven by a surge in applications in New York, New Jersey, Pennsylvania and Connecticut.
Such applications have fallen sharply since. But the increase earlier this month likely will depress job growth for November. Many economists predict that net job growth for November will range between 25,000 and 75,000 -- well below the 171,000 jobs added in October.
"The storm caused bottlenecks in the production process," said Joel Prakken, senior economist at Macroeconomic Advisers. "If you don't have electric power and transportation, you can't do a lot of things."
The lingering damage from the storm is weighing on the economy at a time of great uncertainty caused by the approaching "fiscal cliff." That's the name for automatic tax increases and spending cuts that will take effect without a federal budget agreement.
The Commerce Department said Thursday that growth in the third quarter was significantly better than the 2 percent rate estimated a month ago. And it was more than twice the 1.3 percent rate reported for the April-to-June quarter. The main reason for the upward revision to the gross domestic product was businesses restocked at a faster pace than previously estimated. That offset weaker consumer spending growth.
GDP measures the nation's total output of goods and services -- from restaurant meals and haircuts to airplanes, appliances and highways.
Most economists say economic growth is slowing to below 2 percent in the current October-to-December quarter. That's generally considered too weak to rapidly lower the unemployment rate.
Prakken said the storm could end up lowering the growth rate by a half percentage point.
But by next year, Prakken said cleanup and rebuilding will begin to add to U.S. economic growth.
Many analysts say the region is poised to rebound quickly. Economists at the New York Federal Reserve Bank said Thursday they expect the economy in the New York region to be back on track by early 2013. Recovery in hard-hit New York communities like Long Beach and the Rockaways will take longer.
In the first three months of 2013, the economy's growth could rebound to a rate of 2.5 percent, said Nigel Gault, chief U.S. economist for IHS Global Insight. Gault predicts a 0.4 percentage point boost from the rebuilding and other factors related to Sandy.
"We think that growth will improve as we go through 2013, but that is contingent on us not messing things up by going over the fiscal cliff," Gault said. -