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Hurricane Sandy: US braced for gigantic cost of the storm

Tuesday, 30 October 2012 - 6:33pm IST | Place: NEW YORK | Agency: The Daily Telegraph
Hurricane Sandy threatens to cause significant damage to the US economy, with some experts warning that its impact could even be bad enough to slow America's economic growth this quarter.

Hurricane Sandy threatens to cause significant damage to the US economy, with some experts warning that its impact could even be bad enough to slow America's economic growth this quarter.

As the storm approached New York, the world's financial capital, early estimates suggested that it could cause as much as $15 billion worth of property damage.

Economists said that this tally was taken before considering the cost of hundreds of thousands of workers in the city and along the east coast not being able to go to work Monday and Tuesday, or of the cost of air travel being largely shut down.

"What I'm most concerned about is the interruption to business," said Mark Vitner, an economist at the financial services company Wells Fargo. "How much economic activity is being lost." He estimated that the disruption may cost a further $7 billion (pounds 4.4 billion).

The hurricane has wreaked havoc on US oil refineries on the east coast and brought Wall Street to a standstill.

The New York Stock Exchange and the Nasdaq, home to companies such as Apple and Facebook, will be closed again on Tuesday.

It is the first time the weather has stopped stock markets in the US since 1996, when 20in of snow fell in New York.

The closure of the city's subway system and commuter trains to the neighbouring states of New Jersey and Connecticut will affect businesses far beyond Wall Street.

Although economists cautioned that it will take several days to calculate the damage caused by Hurricane Sandy, it is expected to be among the most costly in history. Hurricane Katrina stands at the top of that list, after causing costs of more than $100 billion.

The insurance industry could withstand claims of about $10 billion, according to Eqetas, a company which models the cost of disasters.

In sharp contrast to Hurricane Irene, which hit New York last August, Hurricane Sandy only gathered momentum as it travelled towards the city and the densely-populated surrounding areas on Monday.

Hurricane Sandy's arrival comes at a difficult moment for America's $15 trillion economy, with next week's presidential election adding uncertainty for consumers and businesses. The world's largest economy is already facing the prospect of both tax rises and spending cuts, which some economists fear could push the country into recession. The economy expanded 2% in the last quarter.

However, some cautioned that the hurricane is not all bad news for the US economy.

Retail sales could rise as people visit supermarkets and DIY shops to prepare for Hurricane Sandy's arrival.

"A lot of people spend money preparing for the storm," said Chris Christopher, an economist at IHS Global Insight. "After the hurricane has gone, they then spend money on home improvements."


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