Sunday, September 10, 2017

Goldman: Hurricane and Economic Data

by Bill McBride on 9/10/2017 09:32:00 AM

A few excerpts from a research note by Goldman Sachs economist Spencer Hill: Hurricane Handbook: Natural Disasters and Economic Data

• We find that major natural disasters are associated with a temporary slowdown in most major growth indicators. ... Modeling these effects, we estimate that hurricane-related disruptions could reduce 3Q GDP growth by as much as 1 percentage point. We believe the main channels for these GDP effects are consumption, inventories, housing, and the energy sector.

• We expect a meaningful drag on key growth indicators over the next two months, including a temporary drag on September payrolls growth of 20k—or as much as 100k if severe storm effects persist into next week (the payrolls reference period). We also expect a near-term boost to headline inflation (around 0.2pp on the yoy rate) due to higher gasoline prices ...

• Given potentially sizeable growth effects from Harvey—and with Irma risks now moving to center stage—we are lowering our Q3 GDP tracking estimate by 0.8pp to +2.0%. However, we expect this weakness to reverse over the subsequent three quarters, more than recouping the lost output.
emphasis added
CR Note: We've already seen a sharp increase in unemployment claims (as expected), and a drop in auto sales. Harvey and Irma will probably negatively impact other indicators for August and September. As Hill notes, we should see a sharp rebound later this year in many indicators.