Katrina's economic impacts estimated
The verdict from the Congressional Budget Office: not good, though maybe not as bad as first envisioned.
In a report Wednesday to congressional leaders, the CBO predicted Katrina will result in job losses totaling 400,000 in the coming months. Also, it is expected to reduce growth by as much as a full percentage point in the second half of this year and push gas prices up by 40 percent from their levels in midsummer.
These impacts were described as "significant but not overwhelming." Still, the CBO said the economy could suffer a more serious blow if energy supply disruptions along the Gulf Coast last longer than expected.
"Last week, it appeared that larger economic disruptions might occur, but despite continued uncertainty, progress in opening refineries and restarting pipelines now makes those larger impacts less likely," the office's director, Douglas Holtz-Eakin, wrote.
The CBO estimated that gasoline prices will peak in September at about 40 percent higher than in midsummer. That could be near, given that the average retail price of regular unleaded gasoline climbed by 46 cents last week to $3.07 per gallon, 34 percent above the July nationwide average.
The report said overall economic growth, as measured by the gross domestic product, could fall by between 0.5 of a percentage point and a full percentage point for the second half of this year.
Before the hurricane, private economists were forecasting growth in the second half would come in between 3 percent and 4 percent following growth of 3.6 percent in the first half of this year.
There have been some promising signs on the energy front in recent days, with crude oil prices dropping as more Gulf Coast production resumes. Light sweet crude for October delivery fell $1.59 to settle at $64.37 a barrel Wednesday on the New York Mercantile Exchange.
The Energy Department said Wednesday that domestic oil production and refinery output should return to pre-hurricane levels by November.
Private economists said they generally agreed with the CBO forecasts.
"Energy is the big wild card. We just don't know where prices will be," said David Wyss, chief economist at Standard & Poor's in New York. "It will be a question of how fast oil refineries and oil pipelines come back."
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