JPMorgan Chase Institute Releases New Research Evaluating Financial Impact of Hurricanes Harvey and Irma
February 28 2018 - 08:00AM
Business Wire
Healthcare and debt payments still lagging
behind pre-storm levels; Debt payments in Miami recovering more
slowly than Houston
Research presents daily financial view of
consumers and small business in the wake of two major
hurricanes
Today the JPMorgan Chase Institute released new research
evaluating the financial impact of Hurricanes Harvey and Irma on
consumers, small businesses and local commerce in Houston and
Miami.
The Institute’s data present an unparalleled view into the lives
of consumers and small businesses, both preceding and following the
hurricanes, to provide a first-ever daily lens into the impact of
these hurricanes on financial flows in the weeks before and after
the hurricanes. The new research reviewed 1 million de-identified
aggregated consumer checking accounts and 40,000 small businesses
checking accounts, as well as local commerce data drawing from 24
billion de-identified credit and debit card transactions across 14
cities, including Houston and Miami.
"As these types of storms become increasingly common and
increasingly expensive, we must do more to understand at a granular
level the financial impact they have on consumers, small businesses
and local commerce," said Diana Farrell, President and CEO,
JPMorgan Chase Institute. "In doing so, we can help government
agencies at all levels, private industry, insurers, non-profits and
consumers better understand what financial resilience actually
looks like, as well as examining how cities should prepare for and
respond to future weather events."
The data show several interesting trends that could impact the
welfare and well-being of residents and small businesses, as well
as potential long-term financial consequences of the storms, which
can help communities better prepare for future disasters. The
research also shows some important ways in which the financial
impacts differed in Houston and Miami. Key insights include:
Consumer Impact:
- During the week of landfall, checking
account inflows for consumers were more than 20 percent ($400)
lower and outflows were more than 30 percent ($500) lower than the
baseline in the week of landfall for both Harvey and Irma.
- During the week of landfall, spending
at healthcare providers was 65 percent and 53 percent lower than
baseline in Houston and Miami respectively. Twelve and 10 weeks
after landfall, that number still had not recovered, with
healthcare spending five percent below baseline in Houston and four
percent lower in Miami.
- Debt payments dropped by more than 15
percent in the week of landfall and cumulatively remained lower
than baseline 12 weeks after Hurricane Harvey and 10 weeks after
Hurricane Irma. Debt payments dropped to a greater extent and took
longer to recover among Miami residents than Houston residents.
- In Houston, student loan payments and
mortgage payments were nine percent and 12 percent lower than
baseline, respectively. In Miami, student loan payments were 19
percent and 16 percent lower than baseline, respectively.
- Spending on home repair had surged by
more 33 percent among Houston residents compared to just nine
percent among Miami residents.
Small Business Impact:
- Cash balances for the typical small
business dropped by more than 7.4 percent after landfall in Houston
and Miami but recovered within two weeks. Few small businesses in
most Houston and Miami neighborhoods had significant revenue loss
for more than four weeks.
- Cash inflows dropped by over 63 percent
for most small businesses in Houston and 82 percent for most small
businesses in Miami, and inflows for most recovered in about a
week.
- Cash outflows dropped by over 54
percent for most small businesses in Houston and 62 percent for
most small businesses in Miami, and outflows for most recovered in
two to three weeks.
- Balances and cash flows fell in all
industries during the week of landfall, but construction, repair,
and maintenance firm balances increased the most in the following
weeks.
Local Commerce Impact:
- The Houston metro area saw a steep
year-over-year spending decline of 7.5 percent in August 2017,
while the Miami metro area experienced a decline of 3.7 percent in
September 2017.
- In the month after landfall, Houston
saw an increase of 9.3 percent year-over-year for September, while
Miami saw a year-over-year increase of 2.4 percent in October.
- It’s important to note this recovery
does not necessarily indicate a recoupment of all financial losses
following the hurricanes, but rather a return to normal spending
level patterns.
Some of the research’s additional takeaways include:
Hurricanes Harvey and Irma represented a major financial
disruption for families and businesses.
Consumers: During the week
following landfall (August 25 in Houston and September 10 in
Miami), inflows for consumers were more than 20 percent, or roughly
$400, lower than the baseline in the week of landfall for both
Harvey and Irma. Similarly, outflows dropped dramatically by more
than 30 percent, or roughly, $500 in the week of landfall for both
Harvey and Irma.
- In the 12 weeks after Harvey’s
landfall, inflows recovered relatively quickly in Houston, but not
so in Miami.
- Twelve weeks after the hurricane,
individuals in Houston had received three percent, or $756, more
inflows above the baseline. In Miami, where many in Irma’s path
evacuated, recovery in inflows was slower. Ten weeks after
landfall, cumulative inflows remained one percent ($149) below
baseline.
- Notably, the hurricanes disrupted
family healthcare spending and debt payment patterns, which both
dropped and had still not recovered to baseline levels in either
Houston or Miami more than two months after the storms.
Small Businesses: Cash balances for
the typical small business dropped by more than 7.4 percent after
landfall in Houston and Miami, but recovered to normal levels
within two to three weeks. While resilience is not the same as
recovery, the financial performance of these firms after a very
material event shows remarkable flexibility in responding to these
storms.
- In the week after landfall, small
businesses experienced large reductions in inflows followed by
nearly equal reductions in outflows. Many had no inflows or
outflows at all during that time. The days of missed economic
activity suggest a meaningful loss to small business suppliers and
customers in the Houston and Miami economies.
- Cash inflows dropped by over 63 percent
for most small businesses in Houston and 82 percent for most small
businesses in Miami, and inflows for most recovered in about a
week.
- Cash outflows dropped by over 54
percent for most small businesses in Houston and 62 percent for
most small businesses in Miami, and outflows for most recovered in
two to three weeks.
- The short-term impact was felt widely
across industries and neighborhoods in both Houston and Miami.
- During the week after landfall, in most
Houston and Miami area zip codes, most small businesses experienced
year-over-year declines in inflows over at least 50 percent.
- In some neighborhoods, an even larger
share of businesses experienced these large declines in inflows
during the week after landfall. More than 70 percent of small
businesses in the 77026 zip code (Kashmere Gardens, Houston) and in
the 33133 zip code (Coconut Grove, Miami) saw inflows decline by
more than 50 percent year-over-year.
- Balances and cash flows fell in all
industries during the week of landfall in both Houston and Miami,
but construction, repair, and maintenance firm balances increased
the most in subsequent weeks.
Local Commerce: Spending growth at
local businesses in Houston and Miami lagged other metros by 8.1
and 8.2 percentage points, respectively, in hurricane landfall
months.
- The decline in spending occurred among
consumers of all income levels and across nearly all age groups,
but nearly all consumers made positive contributions to growth in
the months after landfall.
- In Houston, the year-over-year decline
in spending of 7.5 percent in August was more than offset by a
year-over-year increase in spending of 9.3 percent in September.
Miami experienced a spending decline of 3.7 percent in September
followed by an increase of 2.4 percent in October. The rally in
Miami did not completely offset the decline in September, but note
that recovery was already underway in September, which muted the
measured impact of Hurricane Irma.
- In the months after landfall of Harvey
and Irma, spending growth in Houston and Miami exceeded growth in
other LCC metros by 4.8 and 3.2 percentage points,
respectively.
While consumers and small businesses in both Houston and
Miami may have seen inflows and outflows return to normal and hence
healthy balances, they continue to see significant welfare impacts.
Consumers spent significantly less on both healthcare and debt
payments.
- In the week after landfall, consumers
cut spending across most categories, but spending at healthcare
providers dropped by more than 50 percent and still remained lower
than baseline 12 weeks after.
- Twelve and 10 weeks after Hurricanes
Harvey and Irma, respectively, consumers had not fully caught up on
healthcare and medical payments they had deferred during the week
of the hurricane.
- During the week of hurricane,
healthcare spending in Houston was 65 percent lower than baseline.
In Miami, it was 53 percent lower.
- Twelve weeks after Harvey landfall,
healthcare spending remained five percent lower. Ten weeks after
Irma landfall, healthcare spending remained four percent
lower.
- This raises a critical public policy
question as to whether the slowdown in healthcare spending was
caused by a drop in demand—in that consumers sought out less care
and prioritized spending elsewhere —or by disruptions in healthcare
supply, as a result of the hurricane.
- Small health care service businesses in
Houston had the slowest growing outflows, and saw balances decline
when compared to 2016.
- Debt payments dropped by more than 15
percent in the week of landfall and cumulatively remained lower
than baseline 12 weeks after Hurricane Harvey and 10 weeks after
Hurricane Irma. Debt payments dropped to a greater extent and took
longer to recover among Miami residents than Houston
residents.
Small businesses and consumers alike are holding on to cash,
presumably in anticipation of increased spending. This may be due
to the fact that small business owners and consumers are uncertain
about exactly how much cash they will need on hand for their
long-term recovery.
- Consumer checking account balances were
10 percent or roughly $670 higher than baseline three months after
Hurricane Harvey, but showed little growth after Hurricane Irma. By
contrast, By contrast, in Miami, where damages were less dramatic
and less hurricane relief was extended, consumer balances were 2
percent, or roughly $70, higher 10 weeks after landfall.
Harvey’s impact on spending in Houston was negative across
virtually all consumer income and age brackets, and across all
product categories, leading to a near-total halt in commerce across
Houston’s geography, business size, income and demographics. Irma’s
impact differed from that of Harvey, with less pronounced declines
in local commerce during the month of landfall.
- Local commerce spending declined at
businesses of all sizes, but mid-sized businesses declined most
notably upon Harvey’s landfall. Spending at small businesses did
not experience positive year-over-year growth until October.
- In Houston, local commerce declined
among nearly all consumer groups during the landfall month
(consumers under 25 experienced flat growth). Only spending on fuel
increased during the landfall month, likely due to anticipatory
purchasing.
- By contrast, consumers in Miami
increased spending on nondurable goods in the month of landfall,
and consumers under 25 added to growth.
Click here to read the full reports.About the
JPMorgan Chase Institute
The JPMorgan Chase Institute is a global think tank dedicated to
delivering data-rich analyses and expert insights for the public
good. Its aim is to help decision makers–policymakers, businesses,
and nonprofit leaders–appreciate the scale, granularity, diversity,
and interconnectedness of the global economic system and use better
facts, timely data, and thoughtful analysis to make smarter
decisions to advance global prosperity. Drawing on JPMorgan Chase
& Co.’s unique proprietary data, expertise, and market access,
the Institute develops analyses and insights on the inner workings
of the global economy, frames critical problems, and convenes
stakeholders and leading thinkers. For more information visit:
JPMorganChaseInstitute.com
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For JPMorgan Chase InstituteCaitlin Legacki,
202-585-3702caitlin.a.legacki@jpmorgan.com
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