Chicago area businesses felt Sandy’s wrath
BY FRANCINE KNOWLES Business Reporter email@example.com October 31, 2012 12:33PM
Chicago area businesses felt the wrath of Hurricane Sandy, a massive storm that one early forecast says could end up costing as much as $50 billion in damages and lost business activity nationally while trimming economic growth this quarter.
This short-term blow to the economy will not be “catastrophic” but is expected to subtract about 0.6 percentage point growth from U.S. gross domestic product in the October-December quarter, forecaster IHS Global Insight says in early estimates. The firm projects the storm, which pummeled the Northeast, will end up costing about $20 billion in infrastructure damages and $10 billion to $30 billion in lost business.
The hurricane has resulted in lost wages, production and sales for businesses throughout the region, which makes up about 15 percent of the nation’s economy and covers 15 states.
But Chicago-based Morningstar Inc. economist Robert Johnson doesn’t expect major long-term damage to the economy due to the storm.
“I expect little long-term impact from the storm,” he said. “What generally happens in the short run because people can’t shop and people can’t get to work, economic activity typically goes down after a big event like this, and then it tends to go up afterward as people rebuild and buy stuff…I don’t think it will be any different this time.”
Deerfield-based Walgreen Co. said Tuesday a peak of roughly 750 stores closed during the height of the storm Monday night out of nearly 1,400 stores in the impacted area. By noon Tuesday, 530 remained closed.
Chicago-based Boeing Co. closed a plant near Philadelphia Monday and part of the day Tuesday because of Hurricane Sandy. The plant, which builds Chinook helicopters and employs about 6,000 people, resumed operations on its third shift. Boeing also closed offices in Virginia, Maryland and Washington D.C. Monday and Tuesday due to the storm.
The storm brought cargo shipping to a standstill Tuesday on the Great Lakes as Sandy churned waves up to two stories high, forcing crews to take refuge in bays and harbors.
The Chicago Board of Trade, Chicago Board Options Exchange and Chicago Mercantile Exchange, which halted trading Monday and Tuesday along with the New York Stock Exchange, are all scheduled to resume normal trading Wednesday. A look at the exchanges’ financial records shows a one-day closure costs them several million dollars.
IHS Global Insight estimates insured losses could total $10 billion from the storm. Northbrook-based Allstate Corp., along with insurers Travelers and Chubb, will likely suffer losses due to the storm because they claim a large share of the market in areas where the storm hit, said Morgan Stanley analyst Greg Locraft.
Companies such as Peoria-based Caterpillar Inc. and Moline-based Deere & Co., which make construction equipment, could see some small benefit in increased sales to the region, Morningstar’s Johnson said.
Meanwhile consumers could feel the impact of the hurricane at the gasoline pump. IHS Global Insight noted the storm idled about 70 percent of the East Coast’s oil refineries.
“This does not bode well for the supply of refined oil products as capacity was already quite tight prior to the shutdowns,” IHS Global Insight economists Gregory Daco and Nigel Gault wrote in a report. “We are likely to see an accumulation of crude supply and a shortage of refined products in the coming days, which will inevitably put upward pressure on gasoline prices.”
Contributing: David Roeder, Sandra Guy, AP