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Mix-Ansicht- Not so lovely Rita (Lehman Brothers) - Per_Jakobsson, 24.09.2005, 13:05
Not so lovely Rita (Lehman Brothers)
-->Aus Global Weekly Economic Monitor, 23.09.05
Rita complicates the Fed´s job
...Hurricana Rita could put the economy and the Fed in an even deeper bind. The area at risk is a much bigger part of the US economy than NO and the Mississippi Coast. For example, the GDP of Houston is about 4,5 times the GDP of NO. And while flooding may be less severe in Houston than NO, the Texas Coast is home to even more energy infrastructure than Louisiana. Texas refineries account for about 26% of US refining capacity - the highest concentration in the US - with the Louisiana coast a distant second. Katrina has hobbled about 5% of national refining capacity for an extended amount of time. By Friday, some 20% of US refining capacity has been shut down in anticipation of Rita. Looking at a map, and judging from the severity of the storm, we fear Rita could cause even more disruption to energy markets than Katrina did three weeks ago.
We worry about “nonlinear” impacts from Rita. Rescue and recovery resources are already stretched thin by Katrina. Refining capacity was already tight before both storms. The booming home construction industry was already overheating before recovery efforts begin in the Gulf. Consumer confidence is getting fragile. And with each round of energy and construcktion increases, the risk of a big pass-through to general inflation rises. The only good news for the Fed is that, as with Katrina, they will have time to assess the damage before making their move - the next FOMC meeting is on 1 November. Depending on how Rita plays out, the risks around monetary policy may have just moved up another notch...
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