Katrina’s economic toll may be felt well into ‘06

Catastrophe likely to hinder global growth, economists say

NEW YORK – The physical and psychological damage caused by Hurricane Katrina is likely to reverberate across the global economy in ways that will curb growth well into 2006, economists say.

A spike in already-high energy costs in the United States and around the world tops the list of risks, especially since oil prices are unlikely to return to the levels of early 2004 when they were 50 percent lower than they are today, according to International Monetary Fund Managing Director Rodrigo de Rato.
Katrina shut down large portions of oil and gas production in the Gulf of Mexico at a time when worldwide energy output was already stretched thin. While the storm’s impact was most acute in the United States, it also sent fuel costs higher around the globe, squeezing consumers in Europe and Asia and hurting everyone from truckers to fishermen to airlines.

The shock of higher gasoline prices and concerns about supply shortages appeared to cause a cutback in travel over the Labor Day weekend in the United States. Economists say a slump in consumer confidence is likely. “There’s a psychological impact. Consumers aren’t in a festive mood,” said Mark Vitner, senior economist at Wachovia Securities in Charlotte, N.C.

Associated Press