Here we go again… Hurricane Florence, as many before, is responsible for flooding, destruction, as well as human and material loss. A terrible natural disaster and an intense grief for all the families of the victims.
However, we can still notice, in the midst of the chaos, some data which proves that it’s not as an economic disaster as expected. It is even sometimes the total opposite of an economic catastrophe.
A surprising economic impact
Human and material losses shouldn’t be underestimated: individual hurricanes’ consequences are awful. But if we look at the macroeconomic impact, the data can be surprising. The country’s economic is not that damaged after all.
Sometimes, the economic losses caused by a hurricane can even be compensated by … the hurricane itself.
We can distinguish two areas at the root of a possible positive economic influence. Paradoxically, the more destructive the storm is, the more positive the economic impact.
– An increase in consumption
Destruction results in materials losses. So, the consumers have to repair, rebuild, and repurchase wood, lumber and paint. The impact is huge.
The home improvement retailer Home Depot is used to getting many positive benefits after natural disasters. The company saw its market value grow by 1.4% after the passage of Hurricane Sandy in 2012.
Car sales rise. Almost half a million cars were destroyed after Hurricane Harvey in 2017. And even before the passage of the hurricane, the market value of the caravan and mobile homes had already grown.
– The reconstruction
The construction sector generally boosted from these catastrophic events. Just like at the end of a war, where we notice higher employment rates: reconstruction is generally a good vehicle for growth.
The case is the same with the hurricane Florence, which is considered as one of the most destructive in the United States’ history, but could also become a support for growth in the economy and the American workforce.
Industrial and commercial collateral damages
Hurricane Florence forced some companies to change the usual schedule of benefits. Many hotels have, for example, established discounts to host people who needed a place to stay urgently.
Airbnb, for its part, has renewed its “Open house” program, which asks hosts to offer free housing to victims or first-aid workers.
Other consequences are also unexpected. The cruise sector is also affected for instance. Because of the damage caused by the approaching of Florence, the company Norwegian had to change plans. Instead of anchoring under the sun of the Bermudes, they anchored in … Halifax, Florida. Lots of tourists were quite upset: the temperatures there are not quite the same.
Other sectors had to adapt after Florence. A pig farm in North Carolina had been compelled to stop all activity to avoid an environmental disaster. This pig farm is led by Smithfields Foods, the world’s largest pig meat transformer. They had to close Clinton, one of their biggest slaughterhouses, able to kill 10.600 pigs per days. The economic losses were enormous.
Insurance and reinsurance companies has since been in deep trouble with the Stock Market. For example, Axa lost 0.9% of the market value during the passage of the Hurricane, Munich Re lost 2% and Switch Re 1.5%.
It doesn’t make these catastrophes less tragic
Obviously, voluntarily destroying all of a city is not a viable option to stimulate growth. Although the reboot is not necessarily assured, natural disasters have consequences which allow, at least, to compensate for material losses. Plus, the state of the local economy will affect rebuilding capacities and time. Today, Puerto Rico is still having trouble because of Hurricane Maria.