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.
  • 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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