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Critical U.S. Supply Line Is Disrupted

The sugar Americans add to their coffee could get more expensive too; Department of Agriculture officials are sufficiently concerned about tight sugar supplies because of Katrina that they raised import quotas on refined sugar on Tuesday.

Exporters of U.S. goods, especially farmers in the Midwest, may have the most to lose if New Orleans area ports are out of service for a prolonged period. The harvest is just beginning -- the time when grain and other major commodities for export are carried by barge down the Mississippi River, then deposited in cargo ships to be carried overseas.

Exporters of manufactured goods might simply reroute and ship goods out of Houston or Tampa. Agricultural exporters have fewer options in shipping corn, wheat or soybeans. Moving the crops by train might cost up to five times as much, and even then, other ports often lack the specialized warehouses and equipment needed to handle the crops. If it takes more than a few weeks to fix the ports, a glut of grain and widespread spoilage could yield a disastrous season for farmers.

"If this is a week-long problem, it's probably not too damaging," said J.B. Penn, undersecretary of agriculture for farm and foreign agricultural services. "But if it's much longer, then it's a real problem."

In most severe weather events, a perverse bright side to the economic outlook often emerges. After major storms such as Hurricane Andrew, an economic boom often begins within a few weeks as residents with insurance checks begin rebuilding their houses. Already, in anticipation of such a boom, lumber prices have risen. Yesterday, prices for lumber to be delivered in September rose $10, to $297 per thousand board feet.

But that effect may be slower coming this time around, economists and construction executives said, because of the sheer severity of the damage. "If this was a normal hurricane in Florida, you'd have construction people in pickup trucks heading south right now to help clean up and rebuild," said Steven Cochrane, chief regional economist of Economy.com Inc. "Instead you have the governor saying to stay away."

Reconstruction in the worst-hit parts of New Orleans and neighboring areas will have to wait until levees can be rebuilt and floodwaters pumped out, and there are no reliable predictions on when that will occur. Cochrane guesses that rebuilding -- and its eventual impact in generating jobs and growth -- will not come until next year.

Russell L. Burns, an executive vice president of Turner Construction Co., one of the largest nationwide general contractors, said the firm is not yet pursuing business rebuilding the Gulf Coast; it is too busy trying to figure out how its crews might help get hospitals running and bring in equipment to clear streets in the affected area. "We are not even really thinking about the reconstruction process right now," Burns said.

Some economists said gross domestic product, a broad measure of U.S. output, will grow more slowly in the third and fourth quarters of 2005 than they had expected. For example, John Silvia, chief economist of Wachovia Corp., lowered his GDP growth forecast by 0.5 percentage points to 3.1 percent for the quarter ending Sept. 30.

"There's a lot of lost output here," he said. "The railroads are not working, shipping up and down the Mississippi isn't working, there's a huge loss of personal income in the Louisiana-Mississippi-Alabama region. People just don't have jobs. There's no jobs, no profits in that region for the next few months."

Ben S. Bernanke, chairman of President Bush's Council of Economic Advisers, acknowledged that the hurricane will cause economic distress but predicted in an interview on CNBC yesterday that those effects will not be long-lasting. "My guess is though that as long as we find that the energy impact is only temporary, and there is no permanent damage to the infrastructure . . . the effects in the overall economy will be fairly modest," Bernanke said.

While economists pondered the storm's impact on supply chains and aggregate demand, the businesspeople at the center of the storm have more narrow concerns.

Cindy Goodwin, 47, abandoned the Kenner, La., hair salon she has worked in for 25 years and owned for the past seven, on Saturday afternoon. She has no flood insurance and no idea if the 1,100-square-foot shop still stands.

"I'm not sure if it's a few broken windows and water we can mop up, or worse," Goodwin said yesterday in Shreveport, La., where she is staying with relatives. Her 20-year-old daughter, Angele Goodwin, fears business will be tough in the months ahead regardless of the salon's condition. Customers "will want to pay $5 to get just a trim, rather than $50 for a perm or $60 for highlights," she said.

Cindy Goodwin added, "We've got little old ladies. We're not a froufrou kind of shop. Maybe we should consider going down a bit in our pricing until everybody gets back on their feet."

Dana Hedgpeth, Amy Joyce, Nell Henderson, Caroline Mayer and Ellen McCarthy contributed to this article. Hedgpeth reported from Shreveport, La.


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