Storms, Gas Prices Hit Home

$100B In Uninsured Losses From Katrina; Consumer Spending Plunged In August Full Point As Gas Prices Soared

(CBS/AP)  Hurricane Katrina caused $100 billion in uninsured losses in August while consumer spending plunged by the largest amount since the September 2001 terrorist attacks, the government reported Friday.

The Commerce Department said that people living in the areas along the Gulf Coast devastated by Katrina had suffered property losses totaling $100 billion that will not be covered by insurance. Because of this impact, personal incomes fell by 0.1 percent in August. Incomes would have risen by 0.2 percent had it not been for the hurricane.

In another worrisome sign for the economy, consumer spending, after adjusting for inflation, plunged by 1 percent in August, the biggest decline since September 2001, as consumers pinched by soaring gasoline prices cut back in spending in other areas.

The sharp drop in spending raises concerns about consumers' staying power in the face of soaring energy bills. Consumer spending is closely watched because it accounts for two-thirds of the economy.

Analysts said the toll from Katrina and Hurricane Rita, which struck in September, is likely to depress economic activity for several months.

Together, the hurricanes have driven well over a million people from their homes, and many of the displaced are also jobless, reports CBS News Correspondent John Blackstone. Latest figures show 279,000 have been put out of work because of Katrina, and more job losses from both hurricanes are expected.

Closed refineries are fueling higher prices and fear of shortages. In Georgia truckers spend hundreds filling their rigs. Trucker Ray Houston worries about getting diesel at any price.

"I don't want to get caught without none because some days they say there's going to be a shortage," Houston said.

And as if the pain at the pump isn't enough, CBS News MoneyWatch Correspondent Alexis Christoforous reports that both home heating oil and natural gas have spiked to records since Hurricanes Katrina and Rita hit oil platforms and pipelines. The National Energy Assistance Directors Association warns that heating a typical home with natural gas in colder parts of the country is now expected to cost roughly $1600 this winter, up 64 percent from last year. If you heat your home with heating oil, your bill could rise by nearly a third to about $1700.

There's also worry that the surge in energy prices, partly reflecting the shutdown in production along the Gulf Coast, will so rattle consumers that the economy could be pushed into a full-blown recession. The Conference Board reported a sharp drop in consumer confidence in September.