Henry Wadsworth Longfellow once wrote, “into every life, a little rain must fall,” a piece of poetry that will become a reality this weekend in the American southeast. Except, of course, it won’t be a little rain — it will be a lot of rain for the North Carolina coastline as Hurricane Florence roars in this weekend and brings torrential downpours, high winds, massive storm surges and widely expected flooding to the area.
And while the weather is not usually our beat here at PYMNTS, weather this big is more than a meteorological event — it’s also an event in commerce. A bad one.
Though not expected to be as damaging as the run of hurricanes that ripped through Puerto Rico, Florida and Texas last year, Hurricane Florence is expected to deal $700 million worth of net negative impact on the U.S. economy, not counting insurance losses, according to weather-analytics company Planalytics. And according to experts, the impacts from the storm will likely be felt throughout the end of 2018 and perhaps into 2019.
So how will the hurricane winds blow commerce all over the map for the next few months? It is worth noting that, in some sense, a rapidly encroaching storm actually serves to boost commerce before the avalanche of damage follows.
Consumers this week, as is usually the case, have been flocking to grocery stores. The Charlotte Observer reported that “jugs of milk and loaves of bread were flying off the shelves Tuesday morning” by those preparing for Hurricane Florence — a scene repeated across the Carolinas and Virginia throughout the earlier part of the week as stores over all three states reported wide outages of storm preparedness essentials: water, bread, milk, batteries, flashlights, liquor and junk food.
And no, those last two are not a joke — research on this subject indicates that, in the event of coming adversity, humans beings prepare with a series of practical purchases geared toward safety, and a lot of impractical purchases based on comfort. The effect is pronounced enough that, since 2004, Walmart has been stocking extra Strawberry PopTarts in its stores when a weather emergency is forecast — their sales spike every time.
That pre-storm commerce brought the expected rush of the shady and greedy seeking out to take advantage of the alarmed. Reports began popping up midweek that some Amazon sellers were using the opportunity of an encroaching storm to dramatically raise their prices. Consumers complained loudly and angrily on Twitter — and while Amazon noted that they do not set prices for their marketplace sellers, they were looking into the issue.
“We do not engage in surge pricing, and product prices do not fluctuate by region or delivery location,” an Amazon spokesperson noted. “We have selling policies that all sellers agree to before selling on Amazon, and we’re actively monitoring our stores and removing offers of products that violate our policies and harm our customer experience.”
But the warm-up commerce run is now over, and the main event is underway as Florence, forecast to be the worst storm of its kind to hit North Carolina in nearly 64 years, is expected to have major effects on retail sales, employment and real estate in the state for a long time after the winds stop blowing.
“The first place you’ll likely see it is in initial jobless claims,” Ryan Sweet, an economist at Moody’s Analytics said.
That effect, however, will likely be short lived. Last year, Hurricane Harvey saw an initial spike in unemployment benefit filings in the weeks that followed the storm, and a similar spike was observed after Superstorm Sandy in the Northeast in 2012.
In most cases, however, the employment situation self-corrects pretty quickly — and since overall unemployment is low in the U.S., the effects are not expected to be particularly problematic in this regard.
Sales and consumer spending will take an observable hit — the purchases consumers won’t make, according to Planalytics, will add up to about $700 million in lost economic opportunity.
“If you’re a mom-and-pop and you happen to be in harm’s way, this could be devastating,” said Evan Gold, executive vice president at Planalytics. Florence is “going to be big, and it’s going to be notable.”
Bloomberg Intelligence analysts noted that purchases of discretionary items, including restaurant visits, apparel and home decor, will likely see the biggest hit from the weekend weather. Restaurant and services will take the biggest hit since, like an airplane that takes off with an empty seat, those sales will never be recovered.
Other areas worth watching for impact, experts note, will be automobiles, industrial output and housing. In the wake of last year’s highly active storm season, auto sales took a dive in August, only to come roaring back to a 12-year high in September as consumers with cars totaled because of the flood began to replace them.
Industrial production also took a big hit last September before surging in October, largely driven by Houston’s petro-chemical industry surging back online. North Carolina does not have nearly as large an industrial base as the greater Houston area, but it has enough of one that it is at least an area of concern.
The fate of local real estate is also very much being watched, as by some estimates $1 trillion worth of coastal real estate is sitting directly in the storm’s path this weekend — meaning this could be a very expensive event for insurance companies.
All in all, Florence’s economic impacts will be less than the big storms of 2017. According to Planalytics, roughly $2.75 billion in consumer and retail sales (including restaurants) were lost to Irma, while Hurricane Harvey cost businesses around $1 billion. But they will be felt — particularly by those who will spend much of the next few months repairing the damage.
The good news, such as it is, is that those repairs will perhaps be a bit smoother in 2018 than they were in 2017, given some improvements in payments that have happened in the intervening years.
Insurance payments, Visa’s Cecilia Frew told PYMNTS last year, had to really start to change when it became clear that mailing checks to victims is no longer a feasible solution in the face of a natural disaster.
“This is really a customer service issue. [Customers were saying,] ‘Please don’t mail me a check to a mailbox that isn’t there anymore because it was washed out to sea,’” Frew said during an interview with Ingo Money head Drew Edwards about the rapid emergence of push payments among insurance providers. Visa also committed to getting SMBs back to up and running status after the storms.
Visa was joined in its attention to SMBs by First Data, which was looking to help get SMBs the ability to accept payments again by handing out its Clover Go solution, a mobile debit and credit card reader that quickly lets businesses accept card payments using only a mobile device.
“These people are trying to get their lives and their businesses all up-and-running simultaneously. They can’t accept payments, they can’t sell anything.” Dan Charron, Executive Vice President and Head of Global Business Solutions at First Data told PYMNTS about why the program was launched.
Business that can’t transact, he notes, can’t get online as fast as they want and need to to get their revenue streams up and flowing again.
“I’ve been in this industry for 25 years, and you’re always looking to help people accept payments, but this is so much more than that,” he said. “It’s helping them rebuild their life, their business, their community. There’s a much bigger impact when you feel the human side of business.”
And over the next few days, we will likely see more of the human side of a lot of businesses as the winds eventually die down and the Carolina coast begins to rebuild. It may not be quite the full tilt disaster last year’s storms were, but they will be costly in term of funds spent — and perhaps costly in terms of funds not spent as a big swatch of customers are rebuilding.