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Huge cost, but maybe a silver lining

ANALYSIS

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Is Sandy a result of global warming?

It's unusual for hurricanes to strike at this time of year, says meteorologist Assoc Prof Kevin Walsh.

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WASHINGTON: Hurricanes might linger, as Sandy is expected to over the US north-east for the coming days, but economic prognostications tend not to - the cost of this calamity is being counted in the tens of billions.

There is the cost of all the actual damage. But there's also the cost of measures to minimise damage and/or liability, such as shutting down a dozen or more airlines and whole commercial and retail operations.

In truth, it's way too early to make a sensible call on the full economic impact of Sandy. But it had barely crossed the coast on Monday evening US eastern time when Eqecat, a firm specialising in catastrophe risk modelling for government and insurers, put its neck on the line with an estimate of $10 billion to $20 billion - with a rider that the tab for as much as half of that amount would be picked up by the insurance industry.

A stretch of dark buildings in the Manhattan borough of New York Click for more photos

Hurricane Sandy strikes US coast

Devastating storm affects millions as it bears down onthe US east coast. Photo: (Michael Nagle/The New York Time

It is instructive to go back to hurricane Irene last year and the early damage estimate of $7 billion. By the time the work was done, the bill was more in the order of $15 billion to $20 billion.

Oliver Chen, an analyst for Citigroup, estimated that shopping in areas affected by Sandy could be down as much as 40 per cent for this week and that the all-important monthly retail trade statistics could be dented by as much as 2 to 3 per cent.

That temple of retail therapy, the Saks Fifth Avenue store in Manhattan, was boarded up. And, according to The New York Times, 130 of the 850 Macy's and Bloomingdale's stores nationwide were shuttered.

But all was not lost. Some pundits offered the grandiloquent term ''inter-temporal substitution'' to explain that business lost today was inevitably caught up tomorrow. Others said the cost of new work created by the storm would contribute to much-needed economic growth.

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