Wednesday, October 31, 2012

Can Sandy Boost GDP?

There seems to be some debate about how much Sandy will affect the economy.  Some think that it will provide a real boost to GDP; others are skeptical.  While it's not possible to know for certain how much will be spent specifically to rebuild from Sandy, loss estimates can help us back into an estimate of how much of a boost the storm could provide to economic activity.  If you assume that the amount of money spent to repair damages is exactly equal to the amount of economic losses, then it's pretty easy to calculate how much that would boost GDP.

Right now the estimate from insurance catastrophe modeling firm Eqecat is that Sandy caused $10-$20B worth of economic damage.  Unfortunately $20B is a small number relative to $15T in GDP--it's only 0.13%.  Even if you assume that the spending will be double or triple the losses, the amount as a percentage of GDP is relatively small.

Hurricane Sandy Effect on GDP
Source: Arithmetic

No comments:

Post a Comment

For compliance reasons, I don't post comments to the site, but I do like hearing from readers and am happy to answer any questions. Feel free to use the comment box to get in touch. Please leave an email address in your comment so that I can write back, or email me directly at