Economy

Sandy's Economic Cost: Up to $50 Billion and Counting

Early estimates of the economic impact of Hurricane Sandy put the total loss between $30 billion and $50 billion, making it one of the costliest storms in U.S. history.

Victor J. Blue | Bloomberg | Getty Images

But forecasters acknowledge that their estimates are highly preliminary and the financial toll could rise as the extent of damage from the historic storm becomes more apparent.

The unique nature of the hurricane — the destructive storm surge and the vast and densely populated region affected, accounting for about a quarter of the nation's economic activity — raises questions about whether the normal models used to gauge losses will fully capture the costs of Sandy.

Two principal factors account for the losses: lost economic business activity and insured and uninsured property losses. These will be somewhat offset by economic activity from the cleanup and rebuilding, but there is a substantial debate about just how much of an offset this provides.

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While some analysts have suggested there could even be a net positive impact, when all the spending is added up, economic research on the impact of hurricanes suggests that is not the case.

"It would be naïve to put forward the view that a hurricane is in some sense a stimulus for the economy," wrote IHS Global Insight U.S. Economists Gregory Daco and Nigel Gault. "There's no guarantee that reconstruction activity will be extra activity, on top of what would otherwise have occurred, rather than a substitute for that activity."