Hurricane Harvey, potentially the costliest storm on record, may have taken a large bite out of U.S. economic growth in the third quarter, according to Goldman Sachs.
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Economists at the investment bank believe Harvey could cost as much as one percentage point to third-quarter GDP growth, saying major natural disasters are associated with large declines in economic activity. Harvey brought record flooding to Houston and other areas in southeast Texas. The massive storm forced oil refineries and a critical fuel pipeline to temporarily shut down. Goldman Sachs cited negative impacts to housing, consumption and inventories as well.
As a result, Goldman Sachs lowered its GDP estimate by 0.8 percentage points to 2%. It also projected a near-term drag on September job growth of 20,000, with the possibility of as much as 100,000 fewer hires this month.
However, the U.S. economy should bounce back rather quickly, Goldman Sachs said.
“We expect this weakness to reverse over the subsequent three quarters, more than recouping the lost output,” the economists said in a research note.
The firm lifted its GDP growth estimates for the following three quarters by 0.4, 0.2 and 0.4 percentage points, respectively. Fourth-quarter GDP is now expected to jump 2.7%, followed by 2.5% and 2.4% growth in the first and second quarters of 2018.
Goldman Sachs said it will revisit its GDP estimates once there is more information on Hurricane Irma, which continued to make its way through Florida on Monday morning.
Texas Gov. Greg Abbott has said the state’s recovery from Harvey will cost up to $180 billion. Hurricane Katrina holds the current record with a $108 billion price tag.