Hurricane Florence: How Storms Can Affect the Economy

As Hurricane Florence barrels toward the Carolinas and Virginia, and residents along the coast nail shut windows and head for higher ground, it’s important to remember that hurricanes can have a big impact on the economy.

Oh no, Flo!

Approximately 1.5 million people are evacuating coastal areas, as Florence brews itself into a Category 4 hurricane, about 500 miles wide, and packing winds up to 150 miles per hour.

Storms can damage houses, highways and power lines, but they can also shut down businesses and grind daily activities to a halt.

In fact, Florence could inflict as much as $25 billion in damage to the local economy, including the potential destruction of $8 billion in coastal property, according to reports.

What’s at stake

Combined, Virginia and the Carolinas are responsible for more than $1 trillion in economic activity.

• Of the three states, North Carolina has the biggest and most diverse economy. Its Raleigh-Durham research triangle is home to some of the leading pharmaceutical companies, including Merck and prominent educational institutions such as Duke University and the University of North Carolina.
• Nearby Charlotte is a financial services center, serving as the headquarters for some of the largest national banks such as Bank of America and US Bank. Tourists also bring about $23 billion annually to the state, as they flock to North Carolina’s forests and sandy beaches.
• Virginia and South Carolina depend on automotive manufacturing, agriculture, aerospace, and research, and tourism brings in billions of dollars to both states.

Storms and the stock market

And hurricanes can do funny things to the stock market. The stocks of some companies that write insurance policies for homeowners reportedly took a hit on Tuesday, as investors thought about the payouts they’re likely to make for damage.

Others, such as retail home improvement companies and even car rentals, got a boost.

Hark back to Hurricanes Harvey and Maria

Last August, Hurricane Harvey slammed Houston, the fourth most populous city in the country, with 2.3 million people, causing $125 billion worth of damage, according to some estimates.

Houston’s economy is worth $503 billion, according to the Bureau of Economic Analysis. The city is an oil, gas, and petrochemical production hub for the U.S., responsible for about 3% of the gross domestic product, according to the New York Times. Houston is also an oil export center for the nation.

Hurricane Maria struck Puerto Rico in October, killing up to 5,000 people and cutting power and water to the island for weeks.

Puerto Rico has still not fully recovered from the storm, which did about $90 billion in damage.

Cumulative damage from natural disasters in 2017, including hurricanes and forest fires, exceeded $300 billion in 2017—a record, according to federal data.