In a few days, Hurricane Michael went from nothing to a storm with 155 mile per hour winds. Unlike Hurricane Florence, the winds increased as it went ashore.
The good news is this is a quick moving, small storm. The hurricane force winds only extended for 30 miles. The flooding from rain won’t be as bad as Hurricane Florence and Hurricane Harvey because it is quick moving.
However, the storm surge is hugely problematic. The effects to the economy probably won’t be huge because it missed Panama City and the beach tourist season is almost over.
The storm is mainly impacting rural areas. This storm isn’t doing its worst damage in cities, but it will destroy cotton and peanut crops. Duke Energy stated it expects 200,000 power outages.
The October labor market will be moderately affected by this storm. As you can see from the graphic below, it will also impact Alabama, Georgia, and the Carolinas.
KIE insurance sector ETF was down 2.72% on Wednesday, but that’s actually better than the overall market.
Travelers fell 2.61% and AIG fell 2.66%. Home Depot stock was down 1.05% and Lowe’s was down 2.65%. The retail sector was down 2.46% on Wednesday, meaning only Home Depot outperformed. It’s difficult to measure performance on a volatile day.
With Hurricane Florence, the market had already priced the impacts in days before the storm. As it weakened, some estimates for destruction actually fell.
This storm was different because it formed and strengthened very quickly. Keep in mind, hurricane Michael is hitting in early Q4. This means the negative impact from damage and the positive impact from rebuilding should cancel each other out.
To be clear, damage isn’t good for the economy. It’s not a stimulus as money doesn’t appear out of nowhere to rebuild areas. Firms and individuals need to sacrifice savings or borrow money to get back to normal.
That spending would have occurred over time as it was needed. It looks like a stimulus because a great deal of spending occurs at once. However, that’s borrowing from future growth.
