Hurricane Ida is sure to take a toll on the energy, chemical and shipping industries that have major hubs along the Gulf Coast, but the impact on the overall U.S. economy should be modest so long as damage estimates don’t rise sharply and refinery shutdowns are not prolonged, economists suggested in an Associated Press report.
Ida, which made landfall Sunday (Aug. 29), is tied it for the fifth-strongest hurricane to ever hit the mainland. More than a million customers in Louisiana and Mississippi were without power Monday according to PowerOutage.US, which tracks outages nationwide.
Oil prices weren’t showing a spike in reaction to Ida on Monday even as the storm raged. Prices on the New York Mercantile Exchange were flat, down a bare 0.1% at $68.69 per barrel.
Mark Zandi, a chief economist at Moody’s Analytics, said Sunday the disruptions caused by Ida will likely lead him to downgrade his forecast for annual U.S. economic growth in the current July-September quarter by a few tenths of a percentage point. But that economic loss, he said, could be reversed in the final quarter of the year as a result of the rebuilding from the hurricane’s damage that will likely follow.
Analysts at Citi Investment Research said the drag to GDP growth will be offset by subsequent reconstruction. However, they warned that “inflationary effects may be more persistent as demand for building materials, autos and workers will confront already existing shortages.”
Zandi said he expects the nation’s gross domestic product — its total output of goods and services — to grow at a 6.5% annual rate in the second half of this year, matching the average growth of the first six months. Still, besides the impact of Ida, Zandi noted that the highly contagious delta variant of the coronavirus poses risks to the economic outlook, depending on how much it leads Americans to slow their spending on travel, restaurant meals or other forms of spending.
“The key channel for Ida to impact the broader economy is through energy prices,” Zandi said. “We will have to see how much damage occurred to production in the Gulf and how long that production will stay offline.”