Bloomberg: Consumer comfort drops to seven-week low as gas prices rise

Rising prices at the gas pump helped drive U.S. household sentiment to a seven-week low at the end of April, with the consumer comfort index falling 1.6 points to 56.5.  This is the largest drop since October.

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Economic Impact from Hurricanes: Short-Term Pain and Long-Term Lessons Abound

Just before Hurricanes Harvey and Irma landed on the shores of Texas and Florida, the U.S. economy had been gradually picking up steam, with estimates of third-quarter GDP growth rising to nearly 3.0 percent.  However, given the destruction to the Houston area and throughout parts of Florida, a variety of economists and Wall Street analysts have downgraded this estimate by as much as 0.8 percentage points, and the economic impact from the twin hurricanes could exceed $150 billion, including $20 to $40 billion in lost economic output alone.

Given the unique economies of these two areas, the impacts will be national, regional, and/or local in scope.  Nationally, besides the temporary reduction in GDP growth, prices for gas and other petroleum products (such as aviation fuel and heating oil) are expected to remain elevated until Texas’ refining facilities – responsible for nearly 25 percent of the nation’s output – are back online. Auto sales, already weakening this year after years of rising demand, could decline by 100,000 to 200,000 vehicles as potential buyers focus on other issues.  It will also take months for insurers to deal with up to 500,000 claims for flooded cars, many of which were unsold units on dealer lots.

As of mid-September, we’re already seeing some of the impacts from Hurricane Harvey on retail sales and industrial production, both of which dipped after months of increases.  Yet such dips are transitory, and likely to be made up in the fourth quarter and into 2018.  Similarly, initial applications for unemployment insurance, spiking in the first week of September to the highest level since early 2015, will provide a temporary safety net while most companies survey their damage and gradually re-open for business.

As for the housing market, given that the combined areas of the Houston MSA and the State of Florida had accounted for nearly 14 percent of building permits from January through July of 2017, there will certainly be an impact filtering throughout the building industry.  Prices for lumber – already elevated due to the Trump Administration's 20 percent excise tax on Canadian timber – are likely to rise even further given the scale of homes in need of immediate repair.

National spending on remodeling and repair could rise by nearly 10 percent, while also siphoning off labor and materials from new home construction.  Overall inflation, which has been recently bouncing around the two-percent level, could rise in the short term depending on the demand to rebuild and refurnish households.

In Houston, the floods which had inundated as much as 30 percent of Harris County meant that 100,000 homes or more would have to be partially or totally rebuilt, which has created a surge in demand for temporary lodging and suitable rentals.  For now, look for both new home incentives and apartment rent concessions to wane as excess supply disappears.

Given experiences with previous hurricanes, it will likely take up to five years for the hardest-hit areas along the Texas coast to rebuild.  Still, boosters are already saying that the resilience of Houston’s building industry – the largest market in the country with nearly 45,000 permits in 2016 -- could sharply reduce that timeline.

In Florida, because Hurricane Irma impacted almost the entire state, there was more damage to power and water infrastructure as well as homes and businesses.  In terms of economic loss, although the state’s industrial economy is much less built-up than in Houston, other sectors including tourism,  agriculture, health care and business services are expected to take the biggest hit.

In the long run, there will also be a national discussion about re-building in areas prone to natural disasters such Harvey and Irma.  Although many Houstonians can simply elevate their homes to avoid local flooding, the region’s rapid growth (and related ability to provide affordable housing) will be intently studied.  In Florida -- the lowest-lying state with an average elevation of 100 feet – potential homebuyers may have second thoughts about living close to its 1,200 miles of coastline.

For now, Congress will have to shore up and fix the National Flood Insurance Program, already in debt by $25 billion prior to these most recent storms due to premiums not matching payouts for past disasters including Hurricane Katrina and Superstorm Sandy. Some changes might include reducing the 30 percent commission paid to commercial insurers, streamlining the claims process, or even transferring the flood insurance business entirely to the private sector.

Given that lenders will not issue mortgages on homes in flood plains without the required insurance available, the long-term impact to the building industry could be substantial.

BuilderBytes' MetroIntelligence Economic Update for 2/22/12

Please click here to see the edition of BuilderBytes for 2/22/12 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:

• Only 54% of Americans have more emergency savings than credit card debt
  
• Surging gas prices threaten economic recovery
  

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Want to make sure your company or event is included in the events calendar? Contact editor Dani Smith at dsmith@penpubinc.com.

Is telecommuting the answer to rising gas prices?

David Lazarus, the "Consumer Confidential" reporter for the L.A. Times, has written an article about the potential benefits of telecommuting for employees. I think he's onto something -- with today's technologies it's time that employers moved away from this ancient belief that "face time" -- seeing someone in person at the office -- equates to productivity. When I started working for a San Diego-based firm in 2000, I started working mostly from home, saving the driving mostly for important face-to-face meetings with clients, colleagues, direct reports and supervisors.

Today, eight years later and often from a home office, I work longer and with greater productivity, in part because I save up to two hours per day otherwise lost to commuting, finding something for lunch or being distracted in a myriad of ways. With emails replacing faxes and conference calls replacing many meetings previously done in person, the only thing keeping me rooted in Los Angeles are things I must do in person, such as attending industry events, giving speeches, meeting with clients for the first time or conducting field work.

Unfortunately, most people (and employers) still don't understand the huge advantages of telecommuting even on a part-time basis, and why is that? Because they either didn't bother to ask, didn't listen to the answer or just don't want to adapt. But as gas prices continue to rise, they may no longer have a choice, and this could also have a huge impact on future land use patterns. From the article:

The Energy Department reported Tuesday that the nationwide average for self-serve regular gas hit $3.937 on Monday, up 14.6 cents from the week before. In California, the average climbed 14.7 cents to $4.099. Diesel is even higher, topping $5 a gallon statewide.

But the more painful that things become at the pump, the more our political and business leaders will finally realize that they need to take steps, and soon, to wean us from our self-defeating oil jones.

I'm not just talking about promoting conservation and offering incentives for people to buy hybrids and stuff like that. I'm talking about some radical thinking that could finally ease the epic commutes that are wasting so much time and fuel...

American drivers spent 4.2 billion hours stuck in traffic in 2005, according to a recent report from the Texas Transportation Institute. That's about 38 hours per driver, or nearly an entire workweek.

The institute estimates that all this congestion resulted in 2.9 billion gallons of wasted fuel, or about 26 gallons per driver. Factor in lost productivity, and you have an economic hit to the nation of more than $78 billion.

Not surprisingly, the Los Angeles metro area took the booby prize for worst commute, with drivers languishing an average of 72 hours a year in traffic jams -- whole days of your life that you'll never get back.

Similarly soul-crushing commutes can be found in the San Francisco Bay Area, Atlanta, Washington and Dallas.

One answer, of course, is public transportation. But that seems to be one of those things that most of us support in the abstract but don't make use of on a regular (or even semi-regular) basis...

With the economy on the skids and state and local officials struggling to balance their budgets, I'm not holding my breath that we'll see a vast, multibillion-dollar expansion of public transportation.

Nor do I think that Detroit will make more than a token effort at developing more fuel-efficient technologies that would significantly improve mileage. Big automakers will have to be dragged screaming and kicking into the future.

The only realistic answer I see to runaway fuel costs is to get us off the road more quickly. And that means cutting our commutes.

Let's take advantage of what we have (a rapidly growing broadband data network) rather than waiting for what we don't (a world-class, totally convenient public transportation system and cars that get 75 miles per gallon)...

First, we need to accept that a lot of work no longer has to be done at work. Thanks to the Internet, BlackBerrys and other info-tech advances, many people can be just as productive at home as they can at the office, and sometimes even more so.

I'm not saying that we should all go off-leash. But I am saying that employers could trust workers enough to experiment with one remote day a week -- work-at-home Wednesday, for instance...

Meanwhile, local governments could give businesses tax breaks or credits to establish branch offices. Sure, you'd still have to get to the head office from time to time. But why should someone who lives on the Westside or in the Valley have to commute to downtown L.A. every day?

Let's say that any company with more than 1,000 employees would be eligible for a tax incentive if it opened branch offices that reduced people's commutes to 10 miles or less.

Additional tax breaks could be offered for setting up videoconferencing facilities to eliminate the need for you-are-there meetings.

Rising gas prices changing American lifestyles

When gas rose past $2/gallon, it was no problem for many because, after adjusted for inflation, it was still reasonably priced. Even as it passed $3/gallon it elicited more complaints than changes in behavior, but that is all changing with $4/gallon (or more) gasoline. I think it's fair to presume that the changes we're seeing in lifestyle -- including more carpooling, rising interest in public transportation and walking/bicycling -- will also have a profound effect on where people choose to live. Hello, urban infill! From a USA Today story:

Record high gas prices are prompting Americans to drive less for the first time in nearly three decades, squeezing family budgets and causing major shifts in driving habits, federal data and a USA TODAY/Gallup Poll show.

As prices near — or in some places top — $4 a gallon, most Americans say they are cutting back on other household spending, seriously considering buying more fuel-efficient cars and consolidating their daily errands to save fuel.

Americans worry that steep gas costs are here to stay: eight in 10 say they doubt today's high prices are temporary, the poll finds. It's the first time such a large majority sees pricey gas as a long-term problem.

The $4 mark, compounded by a sagging economy, could be a tipping point that spurs people to make permanent lifestyle changes to reduce dependence on foreign oil and help the environment, says Steve Reich, a program director at the Center for Urban Transportation Research at the University of South Florida...

The average price of a gallon of gas nationwide is $3.65 — the highest ever, adjusted for inflation. California's average: $3.90 a gallon. The federal Energy Information Administration (EIA) expects a $3.66 per-gallon average this summer...

February was the fourth consecutive month in which miles driven in the USA fell, an analysis of Federal Highway Administration data show. There hasn't been a similar decline since 1979, when shortages created long lines at pumps...The decline, while small, is significant because the U.S. population and number of households, drivers and vehicles grow by 1% to 2% a year...

In 2004 and 2005, about one-third of Americans said they cut spending because of rising gas prices. In the new poll, 60% say they are trimming other expenses. Half of households with incomes below $20,000 say they face severe hardships because of soaring gas prices. Three-fourths of households making $75,000 or more also are changing how they use their cars...

Most of those polled expect things to get worse: 54% say they expect gas prices to reach $6 a gallon in the next five years.

For now, they are rethinking the ways they get around, where they buy a home and what they do for fun.