Hurricane Sandy to Cost Businesses Billions

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Sandy Businesses closingBy Chris Isidore

NEW YORK (CNNMoney) -- Even before Hurricane Sandy causes any significant property damage, it is costing billions of dollars as businesses shut down along the storm's expected path.

Economists say it will take a while to fully estimate the economic impact of the storm. But they believe the impact will be enough to lower the nation's gross domestic product, the broadest reading of the nation's economic activity, in the fourth quarter.

"The big story this morning is how much stuff is shut down," said Mark Vitner, senior economist with Wells Fargo Securities. "Business interruption is the biggest impact, at least until we see what happens in terms of property damage." He said early estimates of property damage range around $15 billion.

Vitner said lost business from a storm like this typically amounts to as much as 40% to 45% of the property damage figure. But given the fact that it could shut businesses in New York City and other big East Coast cities for two days or more, the business interruption will be greater than normal.

Economists say some of the lost business -- such as bottled-up shipments in shuttered ports and rail yards -- will be made up as soon as the storm has passed.

"But a lot just won't occur," said Vitner. "For example, business at restaurants, that's a permanent loss. You're not going to eat two lunches tomorrow if you don't eat lunch out today."

Vitner said some of the lost stock market trades likely will not be made up whenever the markets reopen. But Vitner said with the election only a week away, it was expected to be a relatively light trading week even without the storm, as investors waited to see the outcome of the close presidential race.

One New York City business that is losing work is Lightspeed Express, a messenger service, which was in the process of shutting down Monday. It will remain closed until Wednesday.

"It ends up costing us a lot of money. It's like two holidays in a row," said Robert Wyatt, the company's president.

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Wyatt said there was a rush of business Sunday as customers sped up some deliveries. "But you're talking (an extra) hundreds of dollars versus a loss of revenue close to six figures. Most of that won't be made up."

Wyatt said he does have business interruption insurance, but he'll have to wait until Wednesday to find out how it applies to him.

Keith Hembre, chief economist at Nuveen Asset Management, said that some of the lost business will be made up by increased spending preparing for the storm -- residents of the Northeast rushing out to buy flashlights, batteries and even generators, as well as spending on rebuilding and repairs that might take place after the storm. Home improvement retailers such as The Home Depot (HD) and Lowe's (LOW) were jammed over the weekend.

"You can look back on impact of Katrina, in immediate aftermath, there was an economic downturn in a number of data points," Hembre said. "Ultimately the rebuilding activity ended up being stimulative.

Hembre said it's much too soon to estimate how much business will be lost or property damage because of the storm. But while there may be a slight reduction in GDP this quarter, he doesn't think the economic impact will be long lasting.

"The storm won't change the underlying patterns of demand," he said.

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See Gallery
Hurricane Sandy to Cost Businesses Billions

The devastation wrought by Hurricane Sandy is a good reminder that the strength of a storm is less important than where it makes landfall. Despite its enormous size, it was classified as only a Category 2 storm at its peak, and by the time it made landfall in the Northeast, it had been reclassified as a "post-tropical storm" (a designation that will force insurers to pay more in claims than they would have for a storm classified as a hurricane).

Hurricane or not, though, Sandy's landfall near New York City and other major population centers in the region immediately vaulted it onto the list of the most expensive storms in the nation's history. While the first wave of cleanup and recovery continues throughout the region, there's little doubt that the massive flooding and wind damage associated with Sandy will ultimately cost tens of billions of dollars, to say nothing of the human toll.

Click through our gallery to find out how Sandy stacks up to other devastating Atlantic storms.

* - Costs adjusted to 2010 dollars on basis of U.S. Dept. of Commerce Implicit Price Deflator for Construction. The storms from 2011 and later are not adjusted. The National Climatic Data Center (NCDC) rates Hurricane Katrina's damage at $133.8 billion 2007 dollars.

Landfall Category: 1

U.S. Damage: 11.7 Billion

Date of storm: June 18-23, 1972

U.S. areas affected: Florida(Panhandle), Georgia, Carolinas, Northeastern U.S.

This June 23, 1972, photo shows people in  Harrisburg, Pa., being rescued by boat from their homes after Hurricane Agnes caused the Susquehanna River to overflow its banks, leading to heavy flooding.

Source: Weather Underground

Landfall Category: 4

U.S. Damage: $9.7 billion

Date of storm: Sept. 17-22, 1989

U.S. areas affected: Georgia, North Carolina, Puerto Rico, South Carolina, Virginia, U.S. Virgin Islands

A South Carolina man displays a photograph of his house taken before Hurricane Hugo destroyed it in September 1989.

Source: Weather Underground

Landfall Category: 3

U.S. Damage: $11.8 billion

Date of storm: Sept. 20-26, 2004

U.S. areas affected: Alabama, Arkansas, Florida, Louisiana, Mississippi, Tennessee, Texas

Rosa Machado (center) of Lafite, La., walks through waist-deep flood water as a neighbor's trailer burns following Hurricane Rita's late September passage through the area.

Source: Weather Underground

Landfall Category: 1

U.S. Damage: $15.8 Billion

Date of storm: Aug. 26-28, 2011

U.S. areas affected: Connecticut, Delaware, Massachusetts, Maine, Maryland, North Carolina, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Virginia, Vermont, Washington DC

Hurricane Irene crippled 10 states during its slow climb up the Eastern Seaboard, causing massive flooding and power outages. The brutal storm made landfall in North Carolina and traveled to Maine.

Billy Stinson (C), his wife Sandra Stinson and daughter Erin Stinson (R) comfort each other as they sit on the steps where their cottage once stood before it was destroyed by Hurricane Irene on Aug. 28, 2011 in Nags Head, N.C.

The cottage, built in 1903 was one of the first vacation cottages built on Roanoke Sound in Nags Head. Stinson had owned the home, which is listed in the National Register of Historic Places, since 1963. "We were pretending, just for a moment, that the cottage was still behind us and we were just sitting there watching the sunset," said Erin afterward.

Source: Weather Underground

Landfall Category: 4

U.S. Damage: $15.8 Billion

Date of storm: Aug. 13-14, 2004

U.S. areas affected: Florida, North Carolina, South Carolina

At least 13 people were killed when Hurricane Charley left a path of destruction across Florida then continued north and struck the Carolinas.

Pictured: Debris from homes destroyed by Hurricane Charley litters the waterways that surround much of Punta Gorda, Fla.

Source: Weather Underground

Landfall Category: 3

U.S. Damage: $19.8 Billion

Date of storm: Sept. 15-21, 2004

U.S. areas affected: Alabama, Delaware, Florida, Georgia, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia

Residents of Pensacola Beach, Fla., pass by an SUV half buried in sand as they walk back to their homes on Sept. 22, 2004, to inspect the damage caused by Hurricane Ivan.

Source: Weather Underground

Landfall Category: 3

U.S. Damage: $20.6 Billion

Date of storm: Oct. 24, 2005

U.S. areas affected: Florida

After striking Mexico from the Caribbean Sea, Wilma turned northeast, strengthened over the Gulf or Mexico, and made landfall near Cape Romano, Fla., on Oct. 24 as a Category 3 hurricane. The eye crossed the Florida Peninsula in less than five hours, and it moved into the Atlantic just north of Palm Beach as a still forceful Category 2 hurricane.

Pictured: A public phone is surrounded by flood waters near a block of hotels as Hurricane Wilma lashes Cancun, Mexico, on Oct. 21, 2005.

Source: Weather Underground

Landfall Category: 2

U.S. Damage: $27.8 Billion

Date of storm: Sept. 12-14, 2008

U.S. areas affected: Arkansas, Illiniois, Indiana, Kentucky, Louisiana, Missouri, Ohio, Pennsylvania, Texas

Flood waters from Hurricane Ike were reportedly as high as eight feet in some areas, causing widespread damage across the coast of Texas in September 2008.

Pictured: A home in Gilchrist, Texas, is left standing among debris left by Hurricane Ike.

Source: Weather Underground

Landfall Category: 5

U.S. Damage: $45.5 Billion

Date of storm: Aug. 24-26, 1992

U.S. areas affected: Florida, Louisiana

Andrew came ashore in Florida near high tide, pushing a 16.9 foot storm tide (the sum of the storm surge and astronomical tide) into Biscayne Bay, a record for the southeast Florida peninsula.

Source: Weather Underground

Landfall Category: Post-Tropical Storm

U.S. Damage: Early estimates indicate damage and economic losses as high as $50 billion

Date of Storm: October 29-31, 2012

U.S. Areas Affected:  Connecticut, D.C., Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New York, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, West Virginia, Vermont, and Virginia.

Pictured: NEW YORK, NY - OCTOBER 29:  Rising water, caused by Hurricane Sandy,  rushes into a subterranian parking garage on October 29, 2012, in the Financial District of New York, United States. Hurricane Sandy, which threatens 50 million people in the eastern third of the U.S., is expected to bring days of rain, high winds and possibly heavy snow. New York Governor Andrew Cuomo announced the closure of all New York City will bus, subway and commuter rail service as of Sunday evening.

Landfall Category: 3

U.S. Damage: $105.8 Billion

Date of storm: Aug. 25-30, 2005

U.S. areas affected: Alabama, Florida, Georgia, Louisiana, Mississippi, Tennessee

Katrina unleashed torrential rains and a potent storm surge that led to disastrous flooding that left about 1,600 people dead, destroyed  thousands of homes and marred the presidency of George W. Bush, whose administration was severely criticized for its handling of the crisis.

Pictured: President Bush (center) tours the devastation in New Orleans with Mayor Ray Nagin (right), Louisiana Gov. Kathleen Blanco and Vice Adm. Thad Allen.

Source: Weather Underground

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