Could Hurricane Gustav Cause a Recession?

At its height, Hurricane Gustav was a Category 4, less than Hurricane Katrina's Category 5. At landfall, Gustav has been reclassified to a Category 2 storm, again less than Hurricane Katrina's Category 3. In 2005, Hurricane Katrina cost the economy $125 billion. GDP growth dipped from 3.8% in Q3 to 1.3% in Q4. Since the economy was still growing strongly, by Q1 2006 GDP growth had bounced back to a robust 4.8%.

This year, with the economy struggling to escape a slump, a 1% decline could throw the GDP growth rate into negative territory. When combined with the negative growth rate in Q4 2007, this would qualify as a technical recession.

For more on the potential economic impact of Hurricane Gustav, see How Will Hurricane Gustav Affect the U.S. Economy?

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