Devastating Hurricane Harvey, unprecedented in its rainfall, could be a slight negative for U.S. growth in the third quarter, but economists say it may ultimately provide a tiny boost to the national economy because of the rebuilding in the Houston area.
Goldman Sachs economists estimate a very preliminary impact of the storm to be $30 billion in property damages, making it the ninth largest since World War II in terms of domestic property damage. Goldman economists say, in a note, the storm could take 0.2 points off of growth in third quarter because of the impact to the energy sector.
JPMorgan chief U.S. economist Michael Feroli said JPMorgan analysts estimate physical damage from Harvey at between $10 to $20 billion, putting it in the top 10 costliest storms but still well below the record $159 billion damage from Katrina. He said it could add about 0.1 percent to growth, but so far he is not changing his forecast for 2.3 percent third quarter growth and 1.8 percent fourth quarter growth.
"Usually what we see is transitory. Usually, you see a little bit of weakness as interruption to businesses occur. Houston is not a small footprint. You can see a disruption to business, then you tend to see a spurt," said Diane Swonk, CEO of DS Economics. "This is a different kind of area than Katrina. It has airport hubs and things like that."
Growth is tracking at just around 3 percent in the third quarter. Swonk estimates that Harvey could add a few tenths of a percent of growth to the fourth quarter, which she sees at 2.4 percent.
President Donald Trump Monday said he expects "very rapid action" on Harvey relief funding. The president was expected to visit Texas on Tuesday.
Feroli , in a note, points out that the economy in the affected region could suffer while the national economy benefits. He noted that after Sandy in 2012, New York's economy suffered but the national economy did not. The same happened with the Louisiana economy after Katrina in 2005.