From reeling airlines to shuttered chemical plants to oyster shortages, the sprawling economic impact of Katrina began coming into view yesterday, as several Wall Street economists lowered growth forecasts to a near crawl by year's end.
The pain will come mainly from soaring energy prices, not only for gasoline but also for natural gas, home heating oil and jet fuel. But costs are also rising on chemicals used to make products from tennis dresses to compact discs; on coffee, which relies on the crippled port of New Orleans and its vast coffee warehouses; and oysters, four in 10 of which come from the waters off Louisiana.
Kenneth D. Simonson, chief economist of the Associated General Contractors of America, warned of price spikes for asphalt, roofing materials, plastic pipe, insulation, metals and concrete. Midwestern farmers felt the sting of Katrina yesterday as grain prices fell on word that harvests cannot be sent by barge down the Mississippi River for export. And cattle futures declined for the third straight day on speculation that pinched family budgets will mean fewer steaks for dinner.
"There are varying degrees of pain, but I don't think there are going to be many sectors that are not going to be impacted," said John E. Silvia, chief economist of Wachovia Corp. "Every grain farmer, every truck driver, every commercial driver, every consumer in the Upper Midwest whose gas prices have just skyrocketed will be feeling Katrina."
To be sure, most of the pain will flow from one pressure point, fossil fuels, said Nariman Behravesh, chief economist at Global Insight Inc., a Massachusetts economic forecasting firm. Delivery firms such as DHL, United Parcel Service and Federal Express informed customers yesterday they would add surcharges of between 5 and 15 percent.
Record gasoline prices will squeeze family pocketbooks.
General Motors yesterday was already blaming Katrina in part for a 16 percent drop in sales in August.
Without significant relief, falling consumer spending will filter down to smaller items as well. At least one retailer, Macy's owner Federated Department Stores Inc., said the hurricane led to lackluster sales last month.
If the trend continues it "could mean a nasty Christmas" for retailers, Behravesh said.
Relief may not be coming anytime soon. Ben S. Bernanke, chairman of President Bush's Council of Economic Advisers, warned consumers yesterday to expect to pay at least $3 for a gallon of gasoline for the next six to eight weeks.
With that in mind, Global Insight has lowered its economic growth forecast by 1 percentage point for the current quarter, to a still-respectable 3.5 percent. But the final three months of the year could see growth fall to 1.5 percent -- "weak," Behravesh said, "but not a recession."
For the airline industry, the soaring cost of oil will have immediate consequences, warned James C. May, president of the Air Transport Association, the industry's trade lobby. The premium that refiners charge to turn oil into jet fuel has shot from $3 a barrel at the beginning of the year to $25, pushing the effective price of a barrel of oil to around $95 for the already ailing airlines.
Cutthroat competition from new, low-cost airlines continues to prevent carriers from passing all those costs onto consumers. Now, airlines on the brink of bankruptcy, such as Northwest and Delta, could topple, with broad ramifications. Airlines and attendant businesses such as car rental companies employ 10 million, and account for 8 percent of the U.S economy, May said.
"There is no business plan that makes any sense that would suggest we can continue business as usual with $95 a barrel for oil," he said.
The chemical industry also has been slugged with rising fossil fuel prices, in the form of natural gas. Now its customers must deal with potential shortages. More than half the chemical industry's capacity to make alpha olefins -- a key ingredient in shampoo -- is in Louisiana. Nearly half of the ethylene glycol -- used to make polyester -- comes from the region, said T. Kevin Swift, chief economist of the American Chemistry Council.
Roughly 12 billion pounds a year of ethylene capacity, about 20 percent of the nation's total, is shut down or operating at very reduced rates, Swift said. Chris Huntley, a spokesman for Dow Chemical Co. in Midland, Mich., said that with a key plant in St. Charles, La., still closed, the firm has now run out of propylene oxide, used in products from sportswear to detergents to engine coolants. The plant will remain shuttered for weeks.
Along with tennis dresses, the price of coffee also is likely to increase. The price of coffee for November delivery rose 5.4 percent yesterday on word of flooding at Procter & Gamble Co.'s Louisiana Folgers roasting plant. New Orleans warehouses hold up to 1.6 million bags of coffee, a quarter of the raw coffee in the United States. Import prices for steel and tropical fruit, much of which flowed through Louisiana's ports, are also likely to spike, economists say.
As for fish, retailers and wholesalers yesterday said consumers should probably cross oysters off their shopping list because the hurricane destroyed the oyster beds as well as the boats, docks, warehouses and processing plants that ship the bivalve.
"Louisiana is the home state for oysters in this country," and other areas won't make up the loss, said John P. Connelly, president of the National Fisheries Institute. The oyster beds will need to be reseeded and "it will take a lot of time, effort and government help to get the infrastructure back up," Connelly said.
It may also be hard to get gulf shrimp, but because 90 percent of the shrimp Americans eat is imported, supplies should be plentiful.
Staff writers Arshad Mohammad, Carolyn Mayer, Paul Blustein and Michael Barbaro contributed to this report.