Economic Impacts from Katrina

Hurricane Katrina has left a wide swath of devastation in its path across New Orleans and the Gulf Coast.  The recontruction efforts will be going on in those areas for at least a couple of years; however, I've been wondering about other economic impacts across the rest of the U.S. as a result of this storm.

We've been hearing plenty about possible disruptions of energy supplies and energy prices from Katrina.  I'd be willing to bet that those impacts will turn out to be somewhat limited and transient unless some much greater damage to well heads and pipelines in the Gulf is found over the next couple of days.  Not to say that we won't see a spike in gasoline prices, but releases from the U.S. strategic reserve can help to smooth out oil supply disruptions over the next couple of months. 

I am wondering about longer term disruptions to the construction industry as a result of the demand for materials to recover and rebuild from Katrina.  I'm not an expert in this area but in talking to builders in the Nashville area over the past couple of months I've learned that material costs have already increased significantly this year.  This includes materials like concrete, lumber, etc.  In addition to price increases, apparently concrete supplies are such that in some areas of the southeast it has been on a rationing/allocation system.  I'm not clear if this is due to supply problems or just sky-rocketing demand based on the continuing robust construction market combined with good overall economic growth in many cities in the southeastern U.S. 

My recollection is that the construction materials market was somewhat disrupted after Hurricane Andrew as a result of the demand for supplies like plywood, concrete, etc.  Given that for some of these materials we are already in a sitution where global demand (yes, global - the Chinese among others are consuming huge quantities of building materials like concrete, steel, and lumber) is very strong, I wonder if we are looking at the possibility of a ripple effect across the housing industry that has been helping to support the U.S. economy.  I wonder what will happen in this corner of the economy, and others, as a consequence of Katrina.

UPDATE:  Well, the bits were barely dry on this post when I found a headline on the Nashville Business Journal online addressing the cement/concrete shotage.  High spots:

Cement's in short supply and that's causing big problems for a construction industry already dealing with shortages of structural steel and soaring fuel costs.

   

"I would say that this period of time, I've seen the greatest increase in our costs since I've been in this business ... some 30 years," said Jim Winchester, president of the family-owned QUIKRETE in the Atlanta area.

Limited supply has driven up the price of cement, in some cases more than 25 percent in the past year, the Atlanta Business Chronicle reports.

And industry experts say they don't expect relief any time soon.

"Cement is going to be a worry for a long time to come,'' said Ken Simonson, chief economist of the Associated General Contractors of America. About 32 states have experienced shortages of cement, he said.

The shortages are caused by record construction figures.

And that's before Katrina.

Also, when I said the energy impact was likely to be transient - I was thinking on the scale of a few months, not days or weeks, but also not years.  We'll know more in another couple of days once the infrastructure in, under, and around the Gulf is surveyed. 

   

 

Comments

[Brandon]

I hate hurricanes, they all need to die!

[Orleans]

I use to live in new orleans, why did this have to happen

[Alan Coffey]

Maybe we should just outlaw hurricanes.

Seriously, we have a problem with wood and concrete. The US has been fighting with Canada over lumber import tarifs for about a year and half. They want to supply us more lumber at lower prices, the US Government is fighting this at the urging of US producers.
The concrete problem is from the same source directed south. The US government has restricted imports of Mexican cement. Once again, it is my understanding that the Mexicans want to supply us with more cement at a lower price. The US Government says no.

Add tremendous demand from the housing boom to these misguided policies and you have a recipe for rapacious pricing.