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Home » Consumer Information » Hurricanes

Economic Impact of Hurricanes

A severe hurricane can have an immense negative impact on the economy. Large, destructive hurricanes such as Katrina are speculated to cause up to $200 billion in damages annually. A hurricane can have a financial affect in a variety of different ways.

Property damage

Every year, hurricanes destroy homes and property. It is common for one hurricane to cause millions of dollars in damage to housing and other buildings. Many of the structures that are caught in a hurricane are completely demolished, so they will have to be cleaned up and then rebuilt, which is an extremely costly process.

Lack of production

When businesses are damaged or destroyed, the goods they produced or services they provided come to an end. Depending on the size of each business, and the number of businesses that are destroyed, this can cause a huge negative impact on the national economy. After a severe hurricane, many businesses will not rebuild at all because the cost is prohibitive, or out of concern for a future hurricane.

Unemployment

The people who worked at businesses that are destroyed or even temporarily shut down will lose their income. Not only will this be difficult for them individually, it will also hurt the local economy because they will no longer be spending in the same way they used to. This lack of spending can also lead to even more businesses closing, and more people becoming unemployed.

Displacement

After an especially destructive hurricane, many people lose their homes and are forced to move away. They may not be able to build new houses or start over in the same area. When large numbers of people leave the same are at the same time, it will seriously affect the economy of that local community.

Insurance claims

People with hurricane and flood insurance will file claims, causing for a sudden steep rise in the number of pay outs insurance companies must make. This in turn will cause the insurance companies to raise rates to offset their financial loss. Rising insurance costs will lead to more families not being able to afford to purchase and keep insurance.

Damaged crops

Crops can be destroyed in a hurricane or tropical storm, which can lead to a shortage of certain foods. When this happens, the laws of supply and demand dictate that the price of these foods will rise. A product which is low in supply and high in demand will come with a steeper price tag.

Oil

Hurricanes sometimes destroy oil rigs, refineries and pipe lines. Oil companies will then have to partially halt production and make repairs, and the end result is higher prices for gas and fuel. Many industries are heavily reliant on oil production, so when hurricanes cause damage to oil companies, the average consumer will also find the costs of that damage reflected in increased costs for many goods and services they use every day.

Recent research has shown that the amount of damage hurricanes cause is having an increasingly negative affect on the United States economy. The number of annual hurricanes is on the rise, so therefore more damage is done each year. The disturbing results show that Americans can continue to expect higher prices and a poorer economic situation due, in part, to hurricanes.

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