Hurricanes' negative economic impact will be short-lived


Three major hurricanes hit the U.S. this year: Harvey, Irma and Maria. The storms devastated communities, caused loss of life and property, and according to Moody’s Analytics, resulted in billions of dollars in damages.

A report released Wednesday morning from Wells Fargo’s Investment Institute noted that damage estimates from the storms are important to assess the impact on key economic indicators. While damage estimates are preliminary and will likely be revised, Moody’s mid-point estimate is for damages to total $167.5 billion.

Wells Fargo expects damage from the hurricanes will result in a negative impact on U.S. GDP. Wells Fargo estimates that the damages will trim 0.9% off of the U.S. GDP over the third and fourth quarters. But, the bank added that negative forecasts tend to be short-lived, with a burst of activity in the period following the natural disaster.

Wells Fargo, citing Ned Davis Research data, noted that of six major hurricanes that hit the U.S. between 1992 and 2012, the average GDP two quarters before the storm was 1.16%, and one quarter before the storm it was 0.64%. Then, one quarter after the storm average GDP was 0.47% and two quarters after it was 0.85%.

“Despite the impact of these hurricanes, it is unlikely that the U.S. economy will be impacted in a meaningful way over the long run. In fact, using history as a guide, U.S. GDP growth has historically increased in the quarters following a hurricane – with the exception of IKE, which occurred during the US recession – as the relief and construction efforts began to make an impact on the local economies relatively quickly,” according to the Wells Fargo report.