WASHINGTON — Airlines have canceled thousands of flights, stranding travelers around the globe. Insurers are bracing for possible damages of $5 billion. Retailers face shrunken sales.
Hurricane Sandy took dead aim at New Jersey and Delaware on Monday, with sheets of rain and wind gusts of more than 90 mph knocking out electricity and causing major disruptions for companies, travelers and consumers. But for the overall economy, damage from the storm will likely be limited.
Preliminary estimates are that damage will range between $10 billion and $20 billion. That could top last year’s Hurricane Irene, which cost $15.8 billion. If so, Sandy would be among the 10 most costly hurricanes in U.S. history. But it would still be far below the worst – Hurricane Katrina, which cost $108 billion and caused 1,200 deaths in 2005.
Here’s how the storm has begun to affect key areas of the economy:
AIR TRAVEL: Flights in the Northeast are all but stopped for at least two days. Airlines have canceled nearly 12,500 flights for Monday and Tuesday from Washington to Boston. The disruptions spread across the nation and overseas, stranding passengers from Hong Kong to Europe.
Total airline cancellations have already surpassed those from Hurricane Irene last year and are on par with the 14,000 that were scrapped due to the snowstorm that pounded the East Coast early last year. The Airports Council International, a trade group, said that even if the storm damage turns out to be minor, it could be a week before operations are back to normal at major East Coast airports.
RETAILERS: The nation’s big stores are expected to lose billions, and the losses could extend into the crucial holiday shopping season. Sales at department stores, clothing chains, jewelers and other sellers of non-essential goods are expected to suffer the most.
The industry is entering the holiday season, when many retailers collect up to 40 percent of annual revenue. Retailers, excluding restaurants, could lose at least $25 billion in sales this week, estimates Burt Flickinger III with retail consultancy Strategic Resource Group.
Even home improvement chains and grocers that will benefit from shoppers stocking up on emergency supplies before the hurricane and cleaning and repair items afterward could lose sales in the long run if overstretched consumers feel they must scale back.
“If you’re spending $400 on a generator, that could hurt discretionary purchases,” said Brian Sozzi, the chief equities analyst at NBG Productions.
INSURANCE: The cost to insurers is expected to rival the insured damage from Hurricane Irene last year. Damage from Irene cost insurers roughly $5 billion, according to Sterne, Agee & Leach Research. Because the storm is hitting a highly populous region, with “one of the highest concentrations of wealth in the world,” the damages are likely to run into the billions, say analysts at Morgan Stanley.
AUTOS: The effect on auto sales might be minimal, some analysts say. Many people who planned to buy cars in the last few days of the month, when deals tend to peak, bought cars over the weekend instead, said Jesse Toprak, an analyst for car buying site TrueCar.com.
As a result, TrueCar isn’t changing its forecast for October U.S. auto sales. Toprak predicts that more than 1.1 million vehicles will be sold in October, up 11.5 percent from the same month last year.
Toprak also notes that dealers could gain sales once the storm is over if people need to replace damaged vehicles.
POWER: Energy outages and disruptions in major East Coast cities “may take a toll on (power) demand unlike anything we have seen before,” Phil Flynn, a senior market analyst for Price Futures Group, wrote in a report.
TELECOMS: When disaster strikes, phone and Internet service often takes a hit. Phone companies on the eastern seaboard were topping up fuel for backup generators and lining up recovery trailers to move into flooded areas.
Verizon, the largest landline phone company on the East Coast, said the storm had not yet had any major effect, and its network was performing normally. Verizon said all its cell tower sites have at least eight hours of backup power.