The storm is sweeping across a densely populated areas of the country, an area that accounts for 20% of the US population, some of its largest business hubs and much of its most expensive real estate.
Dr Tom Jeffery, chief hazard scientist for analyst CoreLogic, said the storm was likely to cause massive disruption to business and infrastructure and threatened nearly 284,000 residential properties valued at almost $88bn.
"The obvious comparison is with Irene last year, but the impact of Sandy is likely to be much, much greater," he said. Expected storm surges of 6-11ft in Long Island Sound and 4-8ft in the city of New York would hit transport systems and some of the world's most expensive properties. "There's likely to be a lot more damage this time," he said.
As the storm approaches, no one really knows how bad the damage will be but massive disruption has already begun, Randy Frederick, managing director of Active Trading and Derivatives at Charles Schwab, wrote in a note to clients. "For now we wait and hope that everyone stays safe."
The hurricane – or rather, the threat of the hurricane – has caused a shutdown in most of the financial markets, including the New York Stock Exchange and the NYMEX Commodities Exchange, although the bond markets were open for half a day. Morgan Stanley's chief operating officer, Jim Rosenthal, told Bloomberg TV that the firm had certain essential employees at its headquarters in midtown Manhattan and was prepared for an "indefinite period" of storm disruption.
Tom Larsen, senior vice-president at risk analyst EQECAT, said economic damages, direct losses associated with the storm and intangibles such as business interruption, additional living expenses, damage to infrastructure, utilities roads, water and power, and municipal buildings which may or may not be insured, are expected to be $10-20bn. Only about half that sum ($5bn-$10bn) will be insured.
Insurers do not believe Sandy will prove as deadly, or as costly, as previous US storms. The costliest of all time remains hurricane Katrina in 2005, which killed 1,833 people and cost $105.8bn, more than twice its closest rival, 1992's hurricane Andrew.
Ed Noonan, chief executive of insurer Validus Holdings, has predicted that Sandy would cause a "low to mid-single digit billions of insured loss". There are a number of factors that make Sandy "a potentially significant event," Noonan told analysts at his company's earnings conference call, including the unusual nature of the storm, lunar tides and warmer seas that will all lead to "extraordinary levels of participation".
But the losses he is predicting would place Sandy outside of the National Hurricane Center's top 20 most costly storms. Noonan said he expected insurers losses to be similar to hurricane Irene, where insurers were hit with bills for wind damage but many residential losses were not covered by flood insurance.
The predicted high levels of flood damage are likely to push much of the cost onto the National Flood Insurance Program (NFIP), the government insurer that covers over 5.5m at-risk homes across the US. NFIP paid out $1.28bn in losses last year from Irene. The insurer is part of Federal Emergency Management Agency (Fema) and makes insurance available to at-risk communities that agree to adopt flood management systems.
But the size of indirect damages are unknowable at present. Investment banks like Morgan Stanley and Goldman Sachs make millions of dollars a day in profits from trading stocks and bonds, and the loss of two full days of trading may have an impact. Shopping, tourism, eating out – all those consumer activities that make up the lion's share of the US economy – are on hold.
On the other hand, banks rebuilding after storms creates jobs. Economist Peter Morici, of the University of Maryland, sketched out an estimate that such rebuilding would create $20bn to $25bn "in new direct private spending – likely more as many folks rebuild larger than before," he wrote today.
Morici expects hurricane Sandy to actually help the economy in the long run. "Initially, we will have GDP losses of about $30bn in the fourth quarter, but over the long term, the added stimulus from reconstruction will positively affect GDP by about $10bn," he told the Guardian. "We will get back all the GDP lost and gain some $10bn."
Another economist, Jim O'Sullivan of IHS Global Insight, also noted that hurricanes may be "highly disruptive and even devastating to many families and businesses" but rarely impact the national economy. O'Sullivan noted that effects of hurricanes are minor, causing a "fairly insignificant impact on the now near-$16tn GDP."
"Even Hurricane Katrina, which caused an estimated $110bn in damages and devastated New Orleans in 2005, had a relatively modest impact on national GDP," O'Sullivan said. "Extreme weather typically holds down economic activity initially, but can boost spending and output afterward … In some cases, spending is even boosted modestly beforehand. Grocery stores were certainly packed in New York City on Sunday."
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