Irma to depress U.S. economy
Hurricane will add to economic damage already done by Harvey
Hurricane Irma’s expected collision with Florida will probably deepen and prolong the slowdown in a U.S. economy already digesting the impact of another storm that smashed ashore in Texas two weeks ago.
The September timing of Irma threatens economic damage that will spill over into the final three months of the year, extending the volatility the country was set to experience in the third quarter from Hurricane Harvey. While major weather events tend to depress growth before boosting it later, Irma could delay some of the rebound into the first half of 2018.
Harvey knocked offline almost a quarter of U.S. oil refining capacity and caused widespread power outages and flooding, bringing the Houston metropolitan area to a standstill. The impact already was visible in last week’s jump in unemployment-insurance claims, the biggest since 2012, and is expected to show up in upcoming payroll tallies, along with car sales and inflation data.
Harvey’s effects could lower economic growth by 0.3 percentage point in the third quarter, according to the median estimate in a survey of 36 respondents conducted by Bloomberg Sept. 1-7. Gross domestic product expanded at a three percent annual pace in the previous three months.
Irma will “create further weakness in indicators that are already softening as the result of the hurricane,” said Michelle Meyer, head of U.S. economics at Bank of America in New York, who trimmed the tracking estimate for this quarter by 0.4 percentage point to 2.5 percent.
“The rebuilding efforts have taken some time to show through in the data” in the past, so some of the upswing won’t be felt until the first half, she said.
While it’s too early to tell, Irma threatens to have an effect on near-term inflation as it could impact $1.2 billion of crops in Florida, such as tomatoes and oranges. Any significant agricultural damage could lead to higher prices for some time, potentially boosting inflation when measured nationally, Meyer said.
On top of that, just the state’s citrus industry alone supports about 45,000 jobs.