Tag Archives: IHS Global Insight

Holiday Shopping May Suffer from Reverberations of Hurricane Sandy

Economy, , , , , , ,
Sandy’s Power Continues

Sandy’s power is extending beyond the immediate time and place her winds blew and waters surged as businesses see delays hindering their ability to get merchandise into stores in time for the holiday shopping season.

The superstorm not only closed down shipping terminals and covered warehouses with floor to ceiling water. Deliveries were also hindered by fallen power lines, blocked and closed roads, and severe gasoline shortages in New Jersey and New York.

At any other time of year this would be seen as a serious hinderance to business, but now, just as retailers usually begin to prepare for the frenetic shopping of the Christmas holiday season such a backup or cancellation of orders can spell complete disaster. For many merchants the holidays are when the bulk of their business is contracted.

“Things are slowing down,” said Chris Merritt, vice president for retail supply chain solutions at the trucking company Ryder. “This whole part of the supply chain is clogged up.”
Several examples include:

•    FedEx has rented fuel tankers to insure that its delivery trucks have a steady supply of fuel in the face of commercial stations running dry.
•    Ryder has been looking for trucks to rent to add capacity.
•    The major railroad company CSX has been advising their customers to expect delays at least 72 hours long on their shipments.
•    Retailers such as Amazon and Diane von Furstenberg informed customers to expect shipping delays.

Economic analysts are predicting that the storm will reduce economic growth by as much as a half of a percentage point in the last quarter of 2012. This is a large decrease considering the entire economic growth for all of 2012 was expected to be only about 1-2 percent.

Direct losses from Sandy are going to be much less than the losses caused by Hurricane Katrina in 2005, but the impact of Sandy may well be greater in its aftermath due to the dense population in the Northeastern states where Sandy let lose her destructive forces.

The Northeastern US is responsible for about $3 trillion in output, which is about 20 percent of the nation’s total gross domestic product.

“Part of what was lost will be delayed, but part is lost forever,” said Gregory Daco a senior economist with IHS Global Insight.

NYSE Opening After Hurricane Closes Trading for Two Days

Economy, , , ,
Hurrican Sandy Closes NYSE

Wall Street hunkered down on Monday and Tuesday as Hurricane Sandy blew through the region, leaving unprecedented destruction in her wake. But with minimal damage on the prestigious New York Stock Exchange trading floor and hours of preparation and testing of electronic communications systems, the exchange is going to open normally at 9:30am on Wednesday morning.

Peter Anderson, a senior portfolio manager at the Boston-based Congress Asset Management firm said,

“There will be no Halloween costumes on the New York Stock Exchange when the market opens back up because there will be a great deal of tension just in terms of restarting the markets and making sure … trading goes smoothly.”

The forecasting company IHS Global Insight is predicting damage from Sandy could amount to as much as $50 billion. In contrast last year’s hurricane/tropical storm Irene was the cause of $4.3 billion in insured damage.

IHS is saying that property damage could reach about $20 billion and lost business revenue may amount to $30 billion. Together the losses could reduce US overall economic growth by 0.6 percentage points in the last quarter of 2012. Retailers, airlines and home construction firms will most likely be hit hard.

 

Consumer Debt Down Says Federal Reserve

Economy, , ,

In what bodes well for US households and the economy, the US Federal Reserve revealed that total household debt for Americans is slowly heading south, a positive sign that debt holders are managing to reduce the debt they incurred during the boom years of the US economy.

Long Road Ahead

There is still, however, a long way to go. Hope can be found in the fact that consumers lowered their overall debt by $40 billion in the third quarter of 2011, but there is still a long road ahead as the debt still pending totals over $13 trillion dollars, still reminding us of the good old days when US consumers went on a collective borrowing binge. Where is the money still owed? Everywhere- from credit cards to car loans to mortgages.

Mortgages Reach Five-Year Low

Look at the bright side: the debt is going down, slowly but surely. Mortgages have shown the best improvement, reaching a five-year low during 2011’s third quarter. There are several factors pushing down mortgage debt, say the experts, including foreclosures, bankruptcies and a less than vigorous demand for houses. Banks are also lending a hand: burned from the subprime fire, the banks are hesitant, to say the least, to lend out their hard-earned dollars, creating a low-flow situation of mortgage credit.

“The process is still ongoing,” says Greg Daco, economist at IHS Global Insight. “The decline in home prices has reduced movement and activity in the housing market both on the selling side and on the buying side. People don’t want to sell because they’re waiting for prices to stabilize or go up, and people don’t want to buy because they’re waiting for prices to continue to fall.”