How Much Did Hurricane Katrina Damage the U.S. Economy?

Question: How Much Did Hurricane Katrina Damage the U.S. Economy?

Answer: At its height, Hurricane Katrina was Category 5 storm. However, it did most of its damage after it hit land on August 29, 2005, when it was reclassified to a Category 3. Most estimates put the economic loss from Hurricane Katrina at $125 billion, with $66 billion in insured losses. Half of these losses were a result of flooding in New Orleans. University of North Texas Profession Bernard Weinstein put the loss as high as $250 billion. (Source: Swiss Re, Hurricane Katrina, January 25, 2007)

In 2005, GDP growth went from 3.8% in Q3 to 1.3% in Q4. Fortunately, the economy was still growing strongly, and by Q1 2006 GDP growth bounced back to a robust 4.8%.(Source: BEA, National Accounts)

Hurricane Katrina affected 19% of U.S. oil production and caused oil prices to rise $3 a barrel. Hurricanes Katrina and Rita destroyed 113 offshore oil and gas platforms, damaged 457 oil and gas pipelines, and spilled nearly as much oil as the the Exxon Valdez. (Source: About.com U.S Politics, Gustav: Look For Gas Price Increase, August 31, 2008); CNN.com Gustav Sends Oil HigherAugust 31, 2008; About.com Environment, Hurricane Gustav: How Hurricanes Threaten Offshore Drilling and the Environment)

Katrina also struck the heart of Louisiana's sugar industry, with an estimated $500 million annual crop value, according to the American Sugar Cane League. This area of Louisiana has 50 chemical plants, which produces 25% of the nation's chemicals. The nearby Mississippi coast was home to 12 casinos, which take in $1.3 billion annually.

As important as these industries are, the main damage was done to New Orleans. Hurricane Katrina caused $260 million in damage to the port, although it was open to ships just a week later. The city's tourism industry created $9.6 billion annually before Katrina, and has only recently returned to attracting 7.1 million visitors each year, up from 2.6 million in 2006.

Of more importance, but impossible to quantify, was the impact on people and animals. More than than 75,000 people were made homeless, while the death toll was 1,836 people. Over 700 people are still unaccounted for. The storm killed or made homeless 600,000 pets. (Source: HurricaneKatrinaRelief.com)