White House: Storm effect on US economy is short-term

27 September 2005 22:33  [Source: ICIS news]

WASHINGTON (ICIS news)--Hurricane damage to the US Gulf Coast economy and energy infrastructure will have a “palpable” short-term effect, the top White House economist said here on Tuesday, but the economy remains on a growth path.

 

Ben Bernanke, chairman of the president’s Council of Economic Advisers (CEA), said in a speech today that the US economy “is in the midst of a strong and sustainable economic expansion” that is resilient enough to “absorb the shocks to energy and transportation from the hurricanes.”

 

“The devastation wrought by Hurricane Katrina and to a lesser extent by Rita will have a palpable effect on the national economy,” Benranke said in an address to business economists.

 

“In particular, the virtual shutting-down of the Gulf Coast economy will leave its imprint on national rates of job creation and output growth, especially in the third quarter,” he said.  However, Bernanke said, the effect will be short-lived, and “recovery and rebuilding should ultimately increase growth rates and rates of job creation, perhaps by the fourth quarter and certainly in the first half next year.”

 

He noted that US gross domestic product (GDP) has grown at 3.6% over the last four quarters, and real growth has been at a 4.1% annual rate for the past eight quarters.  The destruction caused by the combined hurricane punches, he said, “may reduce growth somewhat in the short run, but the longer-term growth trajectory remains in place.”

 

But Bernanke also noted that storm-related increases in the cost of natural gas - which was already at historic highs - likely will linger “because of damage to plants that process natural gas for final use.”

 

The CEA advises the president on economic and budget matters.

By: Joe Kamalick
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