Stormy Weather and GDP
February 9, 2010
First-quarter U.S. GDP growth is not in danger because of the imminent arrival of a second monster snowstorm to hit the Eastern Seaboard in less than a week. At least that’s the conclusion one draws from an examination of historic quarters when storms or other natural disasters occurred. Here’s a quick sampling.
- August 25, 2005: Flooding from Hurricane Katrina devastates New Orleans, but U.S. GDP expanded at a respectable 3.1% seasonally adjusted annual rate (saar) in the third quarter of that year.
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- August 24, 1992: Hurricane Andrew, the third Category 5 storm to hit the United States, smashes into southern Florida, but real GDP grew 2.6% saar that quarter.
- January 5-10, 1998: Maine, Quebec and parts of Ontario suffer through 80 hours of freezing rain, snapping trees, shutting down power, and making any transportation very difficult, but Canadian GDP rose 3.2% saar in 1Q98.
- Winter of 1993-4: The U.S. Northeast corridor experience an atypical frequency of snow and ice storms, yet U.S. real GDP rose 3.9% saar in 1Q94.
- January 17, 1995: An earthquake walloped one of Japan’s major cities, Kobe; however, Japanese GDP growth of 3.7% saar was one of the strongest in an otherwise weak decade.
- In 1978, the Washington-Boston corridor was hit by back-to-back major snowfalls on January 20 and February 6. Real GDP rose weakly in the first quarter of that year, just 1.4% saar, but more than made up for it with an explosive 16.7% annualized surge in the second quarter.
However severe the disaster may be, it affects only a small geographic part of an economy and disrupts activity for just a bit of a calendar quarter. Moreover, parts of the work stoppage can be subsequently recovered before the calendar quarter ends.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
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