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Cobalt President Jason Rush Quoted on the Impact of Hurricane Katrina to the Economy
THE BUSINESS JOURNAL, PHOENIX (September 7, 2005) - Hurricane Katrina could be a downward tipping point for the national and state economies if mile high gasoline and crude oil prices persist and storm damage results in other inflationary pressures.
Economists and local business executives expect Katrina to have a short-term negative impact on growth and employment.
Arizona State University economist Tracy Clark said if towering gasoline and crude oil prices continue into the fall and winter, the national and local economies will sputter and consumer confidence will slide.
Consumers and businesses "can stand a few months of high gas prices if they are fairly sure its going to drop after that," said Clark.
Gasoline prices spiked after Katrina slammed the Gulf Coast, shutting down oil refineries, trade and energy infrastructure. The Phoenix area has some of the nation's highest gas prices -- well above $3 per gallon.
Clark worries that if high prices continue and hurricane-related disruptions in trade and supply of other commodities and resources, such as timber, create more inflation then consumers and businesses will back away from purchases.
"People don't make large purchases when there is uncertainty and heavens knows there's a lot of uncertainty now," said Clark said.
The Congressional Budget Office said Wednesday that Katrina could result in as many as 400,000 lost jobs and slice 1 percent of national economic growth.
Business leaders say they are taking a wait and see approach to high fuel prices and other potential negative effects of Katrina.
Jason Rush, president of Cobalt Finance (a Scottsdale-based firm that provides finances for businesses buying or leasing commercial trucks), said prolonged high gas and crude oil prices could stall business spending and growth.
Rush said some companies may opt to buy new equipment and trucks to get better fuel efficiency but others may decide to put off new purchases because of the high prices and economic uncertainty.
he slow economic recovery after the Sept. 11/dot-com recession. Katrina is also not the only factor driving up oil and gas prices. Increased international and domestic demand and the very uncertain situation in Iraq are also pushing prices upward and could eventually upend consumer confidence.
Ballooning crude oil, natural gas and gasoline prices are not the only inflationary concerns on the economic radar.
Hurricane damage could also result in supply problems for lumber, steel, concrete and petroleum-based industrial, commercial and construction products. New Orleans and the Gulf Coast are top transportation hubs for such commodities and natural resources.
"On a long-term basis it could impact the pricing of building materials," said Kelly Masuda, senior vice president for KB Home (NYSE: KBH).
That could cause problems a real estate sector already facing some raw material challenges because high global and domestic demand and for a housing market that may already be cooling down.
Masuda stressed that the housing market is still strong and does not expect recent fuel price spikes to turn that economic spigot off.