2018 marked a year of political turmoil, social movements, and, perhaps most devastatingly, a record number of violent natural disasters. The title of “the most destructive”, however, irrefutably must be granted to the fiscal - and environmental - nightmare that was Hurricane Harvey.
In late August, Hurricane Harvey slammed into eastern Texas and the surrounding area, becoming the first major hurricane to do so since Katrina and Wilma in 2005. A category three hurricane, Harvey made headlines for the devastation caused not by its winds, but by its deadly and unprecedented flooding. Harvey’s floods turned Houston’s streets into canals, forced more than 30,000 out of their homes, and claimed the lives of more than 50 people.
Besides the physical and emotional havoc Harvey wreaked, many were also concerned about the damage to national and local economies as well as the U.S’s energy sectors. Houston - with an economy that parallels the size of Sweden’s - is America’s fourth largest city and many economists estimated that damage from the storm would exceed $160 billion - more than Hurricane Katrina and Sandy combined.
According to a composite analysis performed by Investment bank Citi, Harvey so much as temporarily levelled the entire Gulf Coast region of the U.S economy. “Just one week of zero economic output in the affected regions of Texas and Louisiana shaved 0.06 percentage points off the American GDP,” said a senior researcher at Citi.
While 0.06 percent may seem trivial in the face of U.S.’s some 18 trillion dollars-generating economy, at a quarter-on-quarter annualized basis, Harvey reduced national economic growth in the third quarter by 0.3 percentage points, and the affected area - from Corpus Christi to Beaumont - were impeded from delivering on its expected 3% of the U.S. GDP, an amount equivalent to 571 billion dollars.
Citi insurance consultants have also now estimated that the value of property and infrastructure obliterated by the storm at 20 billion, an additional 0.1 percent of the economy. The recovery and full replacement of these capital assets requires a drawn-out -currently still operating - process. Efforts has proved difficult, however, as a majority of the property that were lost to severe flooding (and in particularly those owned by households and small businesses) were not be covered by insurance policies.
Unfavorable fluctuations in regional labor indicators (surge in jobless claims and depressed payrolls), inflation from soaring fuel costs, as well as a slowdown in factory outputs, and motor vehicles sales was particularly prevalent in the periods following Harvey.
Nonetheless, even though negatives impacts of the disaster were daunting and large at first, economic conditions quickly normalized, and insurance as well as assistance funds were made available for the burst of positive restoration and reassembly activities of damaged capital stock (which compensated for lost value-added), and the net economic cost of Hurricane Harvey ultimately arrived at relatively low figures.
Similar to past major weather events, payrolls picked up as responsive labor and massive reconstruction transpired, as lending activities accelerated, supply chains rallied, and vehicles factories, mines and utilities returned to routine operations.
According to the Goldman Sachs group, there was even be a silver lining to this category three storm. While lawmakers scrambled to organize federal relief efforts, “the odds of a government shutdown or a delayed debt ceiling hike was dramatically lowered.