The NY Federal Reserve posted its first article in a series focused on the economic costs and related effects of Superstorm Sandy. The storm caused severe damage to much of the Northeast and current estimates for New York are at $32.8 billion and New Jersey at $29.5 billion.
The first post of the Sandy Series goes over details of economic loss accounting. Losses can be categorized as direct (physical damage) or indirect (economic productivity). The net loss of economic shifting, as explained in the excerpts below, is included in the indirect costs because derived activities did not fully cover storm related losses.
Time shifts. As the storm approached, many consumers made purchases in advance, such as batteries, plywood, gasoline, food, and water, which to some extent offset declines in purchases during the storm… These losses, however, were likely fully made up after workers returned to their jobs, though clearly in some cases making up the work required a greater application of effort and longer working hours than normal.
Geographic shifts. Some business activity was shifted from disrupted areas to areas where things were back up and running quickly… Many hotels in midtown Manhattan were reportedly full during the days after Sandy, and it can be assumed that taxi and car services and some retail outlets (for example, those selling water, batteries, or generators) experienced strong business.
What Cost Estimates Miss. The costs of the storm do not include any surge in economic activity in the period following the storm when the area rebuilds much of the damaged or destroyed capital and infrastructure, a process already under way. Past experience with disasters suggests that this surge in activity over time ultimately can be as large as, if not larger than, the initial decline in activity. (Source: NY Federal Reserve)
Check back for updates on analysis of storm damage as the NY Federal Reserve continues its series.