Digital Readiness Shields Firms as Hurricanes Hammer Local U.S. Economies

A World Bank study using Mastercard data finds that Atlantic hurricanes cut U.S. local business sales by an average of 12.4 percent, or about US$1.38 billion per storm. The economic damage hits restaurants, retail, and independent stores hardest, while firms with strong online sales show greater resilience.

Atlantic hurricanes are not only natural disasters but also acute economic shocks that cut deep into the commercial life of communities, according to a new study by researchers from the National University of Singapore, the Mastercard Economics Institute, and the World Bank. The paper, released as part of the World Bank’s Policy Research Working Paper Series, analyzes anonymized Mastercard transaction data to measure the short-term business impact of 21 Atlantic hurricanes between 2017 and 2024. The findings are sobering: on average, hurricanes reduce merchant sales by 12.4 percent during the preparation, impact, and recovery phases, resulting in roughly US$1.38 billion in lost revenue per storm. With climate change driving more frequent and severe weather events, the study underscores the economic fragility of local businesses caught in their path.

Tracking Spending in Real Time

Unlike earlier studies that relied on broad macroeconomic indicators or infrequent surveys, this research used high-frequency transaction data to capture day-to-day economic responses across nearly 8,000 ZIP codes in the continental United States. By following both in-store and online sales, the analysis paints a more granular picture of how households and merchants adjust their behavior. Sales tick up modestly, about 3 percent, in the days leading up to a storm as families stockpile groceries and fuel. But once landfall occurs, daily sales collapse by nearly 40 percent. Recovery is relatively swift, with activity returning to baseline within 10 days, yet the revenue lost during the storm is not recovered. On average, the blow amounts to two days’ worth of income across the businesses in an affected area, confirming that hurricanes inflict lasting scars even when operations resume quickly.

No Escape Through Online or Nearby Spending

A central question for economists is whether the drop in local merchant sales is offset by spending elsewhere, through online platforms, neighboring ZIP codes, or cash transactions. The evidence suggests not. Residents of hurricane-struck zones reduced spending by more than 5 percent, and similar declines occurred in adjacent areas within 100 kilometers and even on large online marketplaces. ATM withdrawals fell by more than 10 percent, undermining the notion that households simply shifted to cash. These patterns reveal that hurricanes trigger real contractions in consumption rather than temporary diversions, delivering a broad shock to demand that ripples across both local and digital markets.

Winners, Losers, and the Role of Digital Resilience

The economic effects are highly uneven across industries. Gas stations often see sales spikes before storms as people prepare to evacuate, while hotels balance canceled reservations against bookings from displaced families and emergency workers. But for restaurants, retail outlets, and home improvement stores, the disruption is severe and prolonged. Inventory spoilage, anticipatory closures, power outages, and supply chain delays amplify the losses. Independent businesses, particularly home improvement outlets, tend to fare worse than chain stores, though the differences vary by sector.

Digital readiness stands out as a shield against disruption. Merchants with more than 80 percent of their transactions online suffered significantly smaller losses, while offline-dependent businesses bore the brunt of the storm. In industries such as retail and groceries, offline sales losses were more than double those recorded online. Online revenues not only fell less sharply but also bounced back more quickly, underscoring the importance of e-commerce as a resilience tool. Yet, the protective effect of digital sales was meaningful only at very high levels of adoption, suggesting that a minimal online presence is not enough to withstand the shock of a hurricane.

Rethinking Disaster Policy

Perhaps the most striking conclusion is that the intensity of the storm, long used by policymakers to guide disaster responses, is a poor predictor of economic damage. High-category hurricanes do trigger steeper drops in sales during landfall, but the total losses over the full event window are statistically similar to those caused by lower-category storms. Even Category 1 or 2 hurricanes, often overlooked in relief planning, can inflict persistent and widespread business disruption. The study argues that disaster response frameworks must evolve to reflect actual economic impacts rather than rely on wind-speed thresholds.

Demographics also shape outcomes. Communities with higher shares of elderly or youth populations, or with more educated residents, saw larger declines in spending, perhaps reflecting greater caution. Income levels, however, did not significantly alter the results, suggesting that hurricanes suppress commercial activity across rich and poor households alike. Sparsely populated areas experienced the sharpest declines, hinting at weaker commercial ecosystems and fewer substitution options.

Taken together, the findings point to urgent policy implications. Service industries such as restaurants and retail, highly vulnerable to sudden drops in demand, deserve targeted support. Small and independent businesses require special assistance, as they are less financially equipped to absorb temporary revenue losses. At the same time, encouraging digital adoption and e-commerce readiness can help buffer businesses against the mobility restrictions imposed by storms.

Atlantic hurricanes, the study concludes, are not only weather phenomena but systemic economic events that disrupt local commerce on a massive scale. Their impact is immediate, uneven, and costly, leaving communities with billions in lost sales after each storm. While most of the effects fade within weeks, the short-term disruption is large enough to justify a rethink of how disaster preparedness and recovery are designed. By moving beyond storm categories and focusing on the real economic damage sustained by households and firms, policymakers can build more effective strategies to protect vulnerable businesses in a climate era where hurricanes are both expected and inevitable.