Wednesday, April 12, 2000

WILMINGTON, NC -- Real economic growth in southeastern North Carolina will slow from the 7 percent increase originally forecast down to 3.5 percent partly as a result of the seven named hurricanes and tropical storms that have affected the Cape Fear Coast since 1996, said UNC Wilmington economists today. But the heightened level of tropical storm activity does not appear to be driving businesses and households to relocate.

These were just two findings released today by Dr. Claude Farrell, professor of economics, and Dr. William W. Hall, Jr., professor of economics and director of the office of economic development, both in the Cameron School of Business.

Drs. Farrell and Hall conducted an analysis of the effect that the increased tropical storm and hurricane activity of recent years has had and is likely to have on economic activity in this region which includes the coastal counties of Southeastern North Carolina (Brunswick, New Hanover, and Pender) and nearby inland counties. The study analyzed the effects of more active tropical weather on future area economic growth and the efforts that area households and businesses have learned to take to mitigate disruptions in their daily activities.

Dr. Hall noted that seven named storms have affected the region since 1996. Following the 1996 season which had three named storms -- Arthur, Bertha, and Fran -- regional economic activity surged as massive rebuilding efforts were undertaken to repair damages created by the first major storms to affect the area in more than a decade. However, Hall noted that these impacts were one-time in nature and did not continue beyond the end of 1997.

In sharp contrast, the economic impact in coastal counties following the three named storms of the 1999 season ñ Dennis, Floyd, and Irene ñ will be more subdued as damages in this area were not as large as occurred in 1996. Unlike 1996, the inland counties suffered most of the damages from the 1999 storms. Effectively, the storms made worse relatively weak economic conditions in these inland counties. As New Hanover County and especially Wilmington serve as regional trade and service centers, lower levels of economic activity in the inland counties will mean somewhat slower growth in Wilmington and New Hanover County.

A major part of the study involved the analysis of surveys of business firms and households on the effects of the storms. Funded by the Greater Wilmington Chamber of Commerce, these surveys were conducted following the 1996 and 1999 hurricane seasons. They solicited information on the actions that businesses and residences took to recover from storm damages and the effects that the increase in storm activity would have on future plans.

Dr. Farrell noted that survey results were surprising. "Coastal businesses and residents learned a great deal about preparing for storms during the 1996 season and were able to apply those lessons in the aftermath of the 1999 season and recover more rapidly than following the 1996 storms." Inland counties, much harder hit in 1999 than before, will and are taking longer to recover.

The surveys also show that to this point, businesses and households are not considering relocating because of the heightened level of tropical storm activity. However, Farrell stated that "the perception of the world at large about living in and starting businesses in the Wilmington area may be changing."

Given the national perception of the devastation caused by Floyd, the lack of insurance coverage for many of those impacted by that storm, and the dearth of movie activity, the economists have revised their 2000 forecast for the region downward from around 7 percent real growth to approximately 3.5 growth. For the longer term, they expect more irregular and volatile periods of substantial and more modest growth.

For additional comment and/or analysis, please contact Dr. Farrell at 910.962.3511 or Dr. Hall at 910.962.3419.