Blu Putnam - Hurricane May Bring Economic Boost in 2013

Outlook Still Extremely Uncertain as "Fiscal Cliff" Looms

Hurricane Sandy, along with the U.S. elections, carry "exceptionally large" implications for the nation, with the storm likely depressing economic activity late this year but setting the stage for stronger growth in 2013, CME Group Chief Economist Blu Putnam wrote.

Sandy-related disruptions in the Northeast probably will dominate economic data for the fourth quarter, curbing retail sales and industrial production and leading to higher new unemployment claims and more volatile monthly payroll figures, Putnam wrote in an updated forecast.

But the storm’s impact on real Gross Domestic Product should reverse in 2013, he said. "Storm clean-up and subsequent rebuilding efforts will bring increased economic activity, so that U.S. real GDP data for the first half of 2013 may be positively impacted," Putnam said.

Beyond the storm aftermath, the impending "fiscal cliff," a combination of tax increases and automatic spending cuts that will take effect January 1, has fostered "extremely uncertain" economic projections for 2013 and beyond, he said. Among three scenarios for 2013, Putnam cited a 45% probability of a "muddle-through, no long-term fiscal compromise," accompanied by GDP growth of 1.5% to 2.5%.

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