Assessing the Impact of Hurricanes Katrina and Rita

Abstract

In the summer of 2005, while the U.S. economy was growing comfortably despite a few longstanding concerns about deficits and outsourcing, storms were brewing off the Gulf Coast. On August 25, 2005, Hurricane Katrina blasted New Orleans, Louisiana, and the surrounding coastal areas on the Gulf of Mexico. Barely a month later, a second storm, Hurricane Rita, swept through the Gulf region, making landfall between Sabine Pass, Texas, and Johnson's Bayou, Louisiana. Speculation about their likely impact on world energy markets and the U.S. economy began as soon as the hurricanes were forecast to strike the oil-rich Gulf region. This case documents the paths of the storms and provides a summary of the Congressional Budget Office's estimates of the storms' impact on the U.S. economy. It is designed for use in teaching the concept of national income accounts. It can also be used to analyze the impact of exogenous shocks.