Impact of Low-Intensity Hurricanes on Regional Economic Activity

Abstract

Although low-intensity hurricanes cause far less structural damage than high-intensity hurricanes, these weaker hurricanes do impact regional economic activity through “business interruption.” Because the strike frequencies of low-intensity hurricanes are orders of magnitude greater than those of stronger storms, the cumulative impact of frequent “business interruption” may be significant. Using Chamber of Commerce survey data, we estimate industry-specific business interruption losses for three low-intensity hurricanes striking the Wilmington, N.C., region. The average, per-storm regional impacts of business interruption, including direct, indirect, and induced impacts, are equivalent to between 0.8 and 1.23% of annual regional output, between 1.11 and 1.63% of regional employment, and between 1.21 and 1.81% of annual indirect business taxes. While these per-storm losses may appear small, the high strike frequencies of low-intensity hurricanes produce a cumulative (in expectation) impact equivalent to a high-intensity hurricane strike causing approximately $3.7 billion in damage.