Henry Wadsworth Longfellow once wrote “into every life, a little rain must fall” a piece of poetry that will become a piece of literal reality this weekend in the American southeast. Except of course it won’t a little rain – it will be a lot of rain for the Carolina coastline as Hurricane Florence roars in this weekend – and brings with her torrential downpours, high winds, massive storm surges and widely expected flooding.
Weather this big and this forecasted to be a festival of destruction is more than a meteorological event; it’s also an event in commerce.
A bad one – bad enough in fact to be this week’s biggest fizzle.
Though not expected to be as damaging as the hurricane run that ripped through Texas, Florida and Puerto Rico last year – Hurricane Florence is expected to deal $700 million worth of net negative impact on the U.S. economy, not counting insurance losses, according to weather-analytics company Planalytics. And according to experts – the impacts from the storm will likely be felt throughout the end of 2018 and perhaps into 2019.
So how will the hurricane winds blow commerce all over the map for the next few months?
Well – as a tiny sizzle within the fizzle – it is worth noting that in some sense a rapidly encroaching storm actually serves to boost commerce before the avalanche of damage follows.
Consumers this week – as is usually the case – have been flocking to grocery stores. The Charlotte Observer reported that “jugs of milk and loaves of bread were flying off the shelves Tuesday morning” by those preparing for Hurricane Florence – a scene repeated across the Carolinas and Virginia throughout the earlier part of the week as stores all over all three states reported wide outages of storm preparedness essentials – water, bread, milk, batteries, flashlights, liquor, and junk food.
And no, those last two are not a joke – research on this subject indicates that in the event of coming adversity humans beings prepare with a series of practical purchases geared toward safety and a lot of impractical purchases based on comfort. The effect is pronounced enough that since 2004 Walmart has been stocking extra Strawberry PopTarts in its stores when a weather emergency is forecast – because their sales spike every time.
That pre-storm rush of commerce brought perhaps the expected pre-storm rush of the shady and greedy seeking out to take advantage of the alarmed. Reports began popping up midweek when reports began to circulate that some Amazon sellers were using the opportunity of an encroaching storm to dramatically raise their prices. Consumers complained loudly and angrily on Twitter – and while Amazon noted that they do not set prices for their marketplace seller they were looking into the issue.
“We do not engage in surge pricing, and product prices do not fluctuate by region or delivery location,” an Amazon spokesperson noted. “We have selling policies that all sellers agree to before selling on Amazon, and we’re actively monitoring our store and removing offers of products that violate our policies and harm our customer experience.”
But the excitement – high drama – warm-up commerce run is now over – and the main event is underway as Florence – and Florence is forecast to be the worst storm of its kind to hit North Carolina in nearly 64 years – and is expected to have major effects on retail sales, employment and real estate in the state for a long time after the winds stop blowing.
“The first place you’ll likely see it is in initial jobless claims,” Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in reference to Florence.
That effect, however, most agree with likely be short-lived. Hurricane Harvey last year saw an initial spike in unemployment benefit filings in the weeks that followed the storm, a similar spike was observed after Superstorm Sandy in the Northeast in 2012.
In most cases, however, the employment situation self-corrects pretty quickly – and since overall unemployment is low in the U.S. – the effects are not expected to be particularly problematic in this regard.
Sales and consumer spending will take an observable hit – the purchases consumers won’t make according to the Planalytics estimate will add up to about $700 million in lost economic opportunity.
“If you’re a mom-and-pop and you happen to be in harm’s way, this could be devastating,” said Evan Gold, executive vice president at Planalytics. Florence is “going to be big, and it’s going to be notable.”
Bloomberg Intelligence analysts noted that purchases of discretionary items, including restaurant visits, apparel, and home decor – will likely see the biggest hit from the weekend weather. Restaurant and services will take the biggest hit since, like an airplane that takes off with an empty seat, those sales will never be recovered.
Other areas worth watching for impact – experts note will be automobiles, industrial output, and housing. In the wake of last year’s highly active storm season, auto-sales took a dive in August only to come roaring back to a 12-year high in September as the consumers with cars totaled because of the flood.
Industrial production also took a big hit last September before surging in October – largely driven by Houston’s petro-chemical industry surging back online. North Carolina does not have nearly as large and industrial base as the greater Houston area – but it has enough of one that it is at least an area of concern.
The fate of local real estate is also very much being watched – as by some estimates some $1 trillion worth of coastal real estate is sitting directly in the storm’s path this weekend – meaning this could be a very expensive event for insurance companies.
All in, Florence’s economic impacts will be less than the big storms of 2017. According to Planalytics roughly $2.75 billion in consumer and retail sales (including restaurants) were lost to Irma, while Hurricane Harvey cost businesses around $1 billion. But they will be felt – particularly buy those who will spend much of the next few months repairing the damage.
The good news, such as it is – is that those repairs will perhaps be a bit smoother in 2018 than they were in 2017 – given some improvements in payments that have happened in the intervening years.
Insurance payments – Visa’s Celia Frew told PYMNTS last year – had to really start to change when it became clear that mailing checks to victims are no longer really a feasible solution in the face of a natural disaster.
“This is really a customer service issue. At some point, please don’t mail me a check to a mailbox that isn’t there anymore because it was washed out to sea,” Frew during an interview with Ingo Money head Drew Edwards about the rapid emergence of push payments among insurance providers. Visa also committed to getting SMBs back to up and running status after the storms.
Visa was joining in in its attention to SMBs by First Data which looking to help get SMBs the ability to accept payments again by handing out its Clover Go solution, a mobile debit and credit card reader that quickly lets businesses accept card payments using only a mobile device.
It might be easier to mitigate this year’s disasters, because of last years efforts. Still, it is enough to count as fizzle of the week – and a sincere warning to stay safe if you happen to be one of our readers in the path of the storm.