I don't get a whiff of "Harvey might be good for the economy" from this article but, still, beware. From CNBC:
Devastating Hurricane Harvey, unprecedented in its rainfall, could be a slight negative for U.S. growth in the third quarter, but economists say it may ultimately provide a tiny boost to the national economy because of the rebuilding in the Houston area.
Goldman Sachs economists estimate a very preliminary impact of the storm to be $30 billion in property damages, making it the ninth largest since World War II in terms of domestic property damage. Goldman economists say, in a note, the storm could take 0.2 points off of growth in third quarter because of the impact to the energy sector.
JPMorgan chief U.S. economist Michael Feroli said JPMorgan analysts estimate physical damage from Harvey at between $10 to $20 billion, putting it in the top 10 costliest storms but still well below the record $159 billion damage from Katrina. He said it could add about 0.1 percent to growth, but so far he is not changing his forecast for 2.3 percent third quarter growth and 1.8 percent fourth quarter growth. ...
Growth is tracking at just around 3 percent in the third quarter. Swonk estimates that Harvey could add a few tenths of a percent of growth to the fourth quarter, which she sees at 2.4 percent. ...
The Goldman economists said the overall impact of the hurricane on second-half growth is uncertain because the negative effects will likely be offset by an increase in business investment and construction activity.
And here is the part I'm really puzzling about:
There are also some ways the storm could spark a rise in inflation, which has been surprisingly weak this year.
In Houston's case, the storm's impact on the refining sector and gasoline prices could spark inflation, said Swonk. Inflation slowed down this year and is a point of concern to the Federal Reserve, which would like to see more before it raises interest rates later in the year.
The obvious way Harvey could affect inflation is through gasoline prices at the pump, which are already rising just because Houston and the surrounding area have been forced to shut down refining production. ...
But that number could rise if any refineries or pipelines look to be out of commission for more than a few days. The refining sector remains a wild card, and could be a drag on the consumer and economy if there's any significant damage that would send prices spiking for any length of time. ...
Another reason Houston could generate a little inflation is because it's already facing a shortage of construction workers, and if the massive rebuilding effort attracts workers from other states, that shortage could go national, Swonk said. The competition for workers could lead to higher wages.
Another temporary blip in inflation and a boost in consumption could come from car sales. Car prices, for new and used models, have been falling but an expected a surge in demand to replace vehicles lost in flood waters could result in an increase in prices, particularly for used cars.
There could also be a pickup in building materials sales and possibly prices, with lumber already rising because of the new U.S. tariffs on Canadian soft lumber, Swonk said. However, any pickup in inflation could also be offset by a decline in inflation, due to the Amazon and Whole Foods merger. Amazon already cut prices at the grocery chain on its first day of ownership.
I'm skeptical that Hurricane Harvey will contribute to inflation. Every increase in gas prices is not a 1970s style oil shock and the Amazon and Whole Foods merger ... wait, does someone really think that will put downward pressure on the overall price level in the U.S. economy?
And if you want to donate to the relief effort here is one option at the American Red Cross.
