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US economy dodges harsher hit on inflation from Hurricane Ian

Katia Dmitrieva, Augusta Saraiva, Michael Sasso, Bloomberg News on

Published in News & Features

Hurricane Ian has left a path of destruction behind, destroying countless homes, ruining citrus crops and risking fragile supply chains, but the storm’s skirting of a key U.S. fertilizer-production area in Florida means the broader U.S. economy was spared from the worst.

Ian hit the coast of Fort Myers in the country’s third-largest state just shy of the most-powerful Category 5 level on Wednesday and made a second landfall in South Carolina Friday. In addition to the human tragedy, the storm is set to be one of the top-10 costliest storms in the U.S., resulting in about $70 billion to $120 billion in economic damage.

The impact is broad in Florida, including insured and uninsured residences, office buildings, infrastructure and a hit on the key tourism industry. The closure of southeastern distribution channels for products ranging from autos to retail goods may have a domino effect on the rest of the country. But a more lasting hit to inflation was likely avoided as the storm spared a critical production center for fertilizer used by farmers in the U.S. and around the world.

“The storm is devastating for some of the counties in Florida, but the macroeconomic impact is fairly minor,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics. He forecasts the resulting decline in economic output — including lower consumer spending and paused business activity — may shave a few tenths of one percentage point off third-quarter economic growth.

Alongside the devastation in some Florida counties, Ian has exposed the growing risk of climate disasters and the scale of havoc they can wreak on the economy. Scientists warn that storms are increasing in frequency and severity as global temperatures rise. In the U.S., that leaves coasts at particularly high risk of more flooding, property damage, and unemployment — in addition to life-threatening conditions.

Natural disasters cost $280 billion globally last year, according to insurer Munich Re, with damage in the U.S. accounting for about half that value. Much of it wasn’t insured, leaving the tab to consumers, governments and businesses.

 

Total insured damages from Hurricane Ian could be as high as $120 billion, according to AccuWeather, whose estimates tend to be higher than other groups. Research firm Enki Holdings LLC boosted its estimated costs to about $71 billion — including lost economic output from tourism and damaged infrastructure and homes — after the storm strengthened toward South Carolina on Friday. Other estimates ranged from $40 billion to $55 billion.

The economic impact filters through damage to properties, crops and transportation infrastructure including airports and roads. After imports were increasingly diverted from clogged West Coast ports during the pandemic, Southeastern hubs including Jacksonville, Florida, and Charleston, South Carolina, now handle more diversified cargo, highlighting how Ian could eventually cause supply disruptions across industries.

Trucking rates are also likely to increase in coming months after falling this year, as tractor-trailers and flatbed trucks redeploy to hard-hit parts of Florida with loads of rebuilding materials, tarps, water and other supplies, said Robert Weist, a vice president of transportation at Crowley Maritime Corp. in Jacksonville.

“It’s going to tighten up,” said Weist, whose company employs 7,000 people and operates its own trucks, vessels and shipping terminals.

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