NEW YORK The U.S. economy will not be thrown into recession as a result of soaring energy prices and the impacts of Hurricanes Katrina and Rita, The Conference Board reports today, but the increased costs may cut into upcoming holiday retail sales.
While the economic damage assessment is still underway, it is already clear that the impact from Hurricanes Katrina and Rita will be the biggest among natural disasters in recent U.S. history, said The Conference Board senior economist Ken Goldstein. But economic growth could slow down enough to make it feel like a recession, even if one does not occur technically.
With economic growth slowing before the hurricanes, and the cost of energy rising, the storms timing was especially bad for the energy sector. From an energy standpoint, the storms could not have come at a worse time for U.S. consumers and businesses, says Goldstein. While Katrina wasnt necessarily a bigger storm than Hurricane Andrew that crippled southern Florida in 1992, it disrupted energy supplies at a time when the balance between supply and demand was already precarious. Hurricane Ritas impact was less than Katrinas because it largely spared the chemical and proto-chemical facilities in the region.
Beside energy shocks, The Conference Board said, the hurricanes could: erase up to half a million jobs; and incomes or output losses could total $500 million, which would slow the economy to a growth rate of less than 2% for at least one quarter.
The Conference Board said energy prices can be expected to fall back in the near future.
