Hurricane Sandy moved closer to the New Jersey coastline Monday morning and was expected to pummel shore communities with 85 miles per hour wind, extreme tides and severe flooding later this afternoon.
The National Hurricane Center has warned nearly half a dozen states including New York, Virginia, Connecticut and Pennsylvania to prepare for what many are calling a "Frankenstorm" — a frightening mix of rain, snow and wind that's part hurricane, part nor'easter.
More than 60 million Americans are likely to be impacted by Sandy and experts are already forecasting damages in the range of $2 billion to $100 billion.
Hundreds of schools, offices, shopping malls and restaurants have closed their doors in anticipation of the hurricane. Broadway theaters canceled their shows. Atlantic City casinos sent gamblers home.
New York City suspended all subway and bus service and New Jersey shut down its public transportation. U.S. stock markets also halted both floor and electronic trading on Monday. The last time the New York Stock Exchange closed because of a weather-related event was on Sept. 27, 1985, when Hurricane Gloria pounded the East Coast.
Airlines have grounded thousands of flights in the Northeast; according to the flight-tracking service FlightAware, nearly 7,500 flights had been canceled for Monday and Tuesday. President Obama declared New Jersey, Rhode Island, New York, Pennsylvania and the District of Columbia as state of emergencies.
Ryan Sweet, a senior economist at Moody's Analytics, says Sandy would be a costly storm but one that would have little impact on fourth quarter gross domestic product.
"It's much more a regional story…[Sandy] will not have significant U.S. macro economic implications," he says in a phone interview. Sweet estimates the lost economic output between Washington, D.C. and New York City would equal at least $10 billion a day.
Diane Swonk, chief economist at Mesirow Financial, says Sandy could boost spending "fairly dramatically" as people stock up on food, water, batteries and other essentials before the storm hits landfall.
"This will show up in increased spending at hardware and home stores," she writes in a recent note. "There should also be an increase in spending, once damages from the storm are assessed and repairs get underway. That spending could borrow a bit from traditional holiday sales, depending on how much insurance is paid on those claims."
The closure of supermarkets, retail stores and restaurants could "negatively impact retail sales by half a percent," according to Lance Roberts, CEO of Streettalk Advisors. Sandy's damage may result in lost wages and a rise in unemployment claims in the short term, he says, but hurricanes can also boost GDP depending on the severity of the damage and cost to homeowners and local businesses.
Sandy's wrath could push up gasoline prices if oil refineries and oil ports in Philadelphia, Northern New Jersey and Delaware go offline, notes LPL Financial economist John Canally. Power outages are the most serious threat to businesses and consumers, he adds, but Sandy could have the same effect on retail spending as last October's abnormal East Coast winter storm: not much.
"People are sitting in their homes and not spending," Canally says. But "it's not like a week before Christmas" or another major holiday, he adds.
Hurricane Irene in 2011 cost an estimated $15 billion to $20 billion in damages.
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