Impact of Katrina on National Economy Likely to Be Limited

NEW YORK, Sept. 1 /PRNewswire/ — Although the human tragedy of Hurricane Katrina is enormous and property damage immense, economists from Standard & Poor’s feel the impact on the nation’s economy is likely to be limited.

“The near-term disruption should reduce GDP in the current quarter, but by less than many think, since most activity revives quickly after such an event and the rescue and repair activities count as additions to GDP,” said S&P chief economist David Wyss. “Although damage to ongoing production has historically been small after similar events, it may be worse in this case because of New Orleans’ reliance on tourism and the impact of Katrina on oil production and refining capacity.”

Economists Wyss and Beth Ann Bovino say that even if the disruption to oil production is temporary, third quarter real GDP could be reduced by 0.5 percentage points. Over the next four quarters, they say there is likely to be a positive impact of about 0.2 percentage points. However, they caution that at this time, these figures are only “wild guesses.”

The report, “U.S. Economic Update: Impact from Katrina Big, But How Big?,” is available to subscribers of RatingsDirect, Standard & Poor’s Web-based credit research and analysis system, at http://www.ratingsdirect.com/. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an email to research_request@standardandpoors.com. All Standard & Poor’s research information is accessible for 24 hours after publication on the public Web site, http://www.standardandpoors.com/. Members of the media may obtain a copy of the report by sending an email to marc_eiger@standardandpoors.com.

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