Close call: What does Gustav mean for the economy?

waiting for gustavDespite the massive force that was Gustav, New Orleans avoided the brunt much better than expected, which is good news for the economy. Well, better news, anyway. Storms of this size by definition have an impact on the economy.

Even though damages to homes, infrastructure and energy production won't be known until later this week, several sources have already shifted their economic forecasts toward the positive.

Consumers across the board will be glad to hear that natural gas futures have already dropped slightly, as well as gasoline prices and the cost for natural gas in the month of October.

The Wall Street Journal reported that the dollar gained strength due in part to Gustav weakening as it made landfall, which is good news for residents of the affected area as well as the economy. The weakened storm will create less of a burden on the U.S. economy, coupled with what many hope are minimal disruptions to the oil and natural gas sectors. If these hopes are confirmed, the dollar should gain even more strength lending a sturdier backbone to the U.S. economy overall.

Even though the storm has weakened, it will not fade quietly into the night without claiming both personal property and lives, which will strain people and the economy. CNN reports that Gustav will prove to be a downward pull on the economy even with damage estimates likely to be a quarter of those experienced due to Katrina. The current state of the economy makes even these smaller damages harder for companies and insurers to absorb. They also warn that while energy prices remain stable, the effects of Katrina took several days to penetrate the market.

There is a silver lining in Gustav's cloud in that disasters generally have a long term positive effect on the economy due to insurance payouts. Assuming insurers don't play games for years to come, the effected regions and certain industries may feel the effects akin to second stimulus package because of the need to rebuild and restock the homes and businesses destroyed by Gustav. Even with the long term benefits associated with a hurricane and the climbing dollar, the only certainty is that it will continue to be a tough time for many as dislocated individuals struggle to rebuild lives, homes and careers in these Southern states.
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