Hurricanes Could Cost GDP Half a Percentage Point in Q3
Noel Perry speaking at the FTR Transportation Conference. Photo: Evan Lockridge
Speaking about the impact of Hurricanes Harvey and Irma at the FTR Transportation Conference, analysts estimated that the economic impact on the region could cost GDP 0.5% in the third quarter of 2017.
With devastating floods caused by torrential rain in Hurricane Harvey and storm surges over flat terrain in Hurricane Irma, economic activity was significantly altered in Texas and Florida. Both of those states represent about 15% of the entire U.S. economy, ranking second and fourth respectively economically. The two states also make up about 7% of trucking activity in a normal day and affect another 4% as important parts of truck trip circuits, according to FTR.
While it’s too early to gauge the effect from Hurricane Irma, FTR’s concentration on understanding Hurricane Harvey allowed FTR senior analyst Noel Perry to provide an initial assessment.
Perry expects Irma’s effects to be less catastrophic in a single place, but its effects will be more widespread because of the speed and size of the storm. In the amount of time that Irma will have traveled from Florida to its expected eventual end in Indiana, Harvey remained stalled in Southeast Texas, drenching a single location.
Another difference is that Houston is a major manufacturing region with chemical plants right down on the water, while Florida is consumer-oriented. The effects in Texas will be centered around tank trucks and railcars while Florida’s will affect dry vans with consumer goods and flatbeds with wall board.
Using data it collected form Harvey, FTR expects this week to be a major down week in trucking in the Southeast with volumes off by as much as 25%. Inbound freight to Florida will most likely demand a premium of anywhere from 10-30% while outbound prices may fall. Volume is expected to normalize during the second week for inbound freight, then run modestly higher for six months or more.
“Expect another couple of weeks of tightening from Harvey,” said Perry. “Throw in the Harvey-inspired fuel price hikes and you get 20%-plus jumps in average national spot market pricing. It doesn’t take long for such regional stress to show up in the national numbers. It is certain that Irma will occasion several more weekly jumps.”