Hurricanes Will Eventually Strengthen U.S. Economy

The aftermath of Hurricanes Katrina and Rita should eventually bring positive results to the U.S. economy, specifically affecting the nation?s GDP and non-farm payroll jobs, according to an economic forecast from global trade credit insurer Euler Hermes ACI.

Owings Mills, MD October 2, 2005 -- The aftermath of Hurricanes Katrina and Rita should eventually bring positive results to the U.S. economy, specifically affecting the nation?s GDP and non-farm payroll jobs, according to an economic forecast from global trade credit insurer Euler Hermes ACI.

In a recent teleconference presented by the National Association of Credit Management (NACM), Dan North ? Euler Hermes ACI Chief Economist ? discussed the short- and long-term effects that the hurricanes will have on the nation?s economy. North predicts that an initial decline will eventually lead to a bolstering of U.S. employment and GDP.

?We are probably going to see a .5% to 1.0% decline in GDP for the second half of 2005 that will be directly linked to the disasters, especially the devastation left by Hurricane Katrina,? said North. ?However, it is likely that economic growth will be stimulated for some time following the beginning of reconstruction efforts.? Historically, the U.S. GDP has risen following a severe natural disaster. North pointed to four previous weather events ? droughts in 1980 and 1988, Hurricane Andrew in 1992, and floods in 1993 ? after which the declining GDP rebounded during the recovery efforts.

Similarly, the number of non-farm payroll jobs in the U.S. is expected to plummet following the hurricanes, only to rebuild and grow in the quarters following the disasters. North again showed historical data related to the previous four events to back up his claims. ?I especially see a growth in the construction sector for devastated regions like New Orleans, much like the rise in building activity in Florida the year after Hurricane Andrew,? North said.

Meanwhile, the pressure on oil prices due to the platform shutdowns during and after the hurricanes will continue, putting an additional strain on U.S. business and consumers. North counted oil prices as his second most important economic risk factor, just behind the flattening yield curve.

Despite the recent disasters, North maintained a positive point of view for the nation?s economy. ?Overall, I see a reasonable economic outlook for the U.S. for the remainder of 2005 and throughout 2006,? North concluded. ?GDP is reasonably strong, inflation is modest for now, interest rates are near 40-year lows, and employment is strong. However the persistence of higher than expected oil prices has led Euler Hermes to cut its 2006 U.S. GDP forecast by 0.2% to 2.5%, in line with a 0.3% downward revision in world GDP growth to 2.7%?

Euler Hermes ACI ? North America?s largest provider of trade credit insurance and global risk management information ? produces a quarterly Economic Outlook. For more information on the company and its products and services, visit www.eulerhermes.com/usa.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,400 employees in 40 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 1.9 billion euros in 2004. The North American subsidiary (Euler Hermes ACI) is headquartered in Owings Mills, MD. For more information visit www.eulerhermes.com/usa.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,400 employees in 40 countries, Euler Hermes offers a complete range of services for the management of customer receivables and posted a consolidated turnover of 1.9 billion euros in 2004. The North American subsidiary (Euler Hermes ACI) is headquartered in Owings Mills, MD. For more information visit www.eulerhermes.com/usa.

Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor?s rates the group and its principal credit insurance subsidiaries AA-.

Press Contact:
Rick Ostopowicz
Euler Hermes ACI Public Relations and Communications Specialist
Phone: (410) 753-0652

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