A note from the NAM’s economist, David Huether:
The volcanic explosion under one of Iceland’s glaciers last week could have a short term, though possibly significant, impact on U.S. trade in the second quarter.
Due to high levels of volcanic ash in the atmosphere, which can cause engine failure in airplanes, airports have been shutting down across northern Europe. Experts predict that the ash plume could last for days. If days turn into a week or more, the impact on U.S. trade could be noticeable, since 13 percent of U.S. merchandise exports are transported by air to Europe. The April trade figures will come out June 10th, so we’ll have to wait until then to see the impact.
Here’s BBC’s take, “Iceland volcano cloud: The economic impact,” reporting on the transportation sectors in Europe. Especially hard hit are industries that rely on air transport, including producers of perishables like fresh food and flowers.
In the short-term, the overall economic impact of the disruption is expected to be minimal.
But a prolonged period without air transport could have a detrimental effect on European economies just as they are emerging from a damaging recession, some economists warn.
A drop of between 1% and 2% for European economies is not being ruled out.
“That would mean a lot of European countries wouldn’t get any growth this year,” said Chatham House senior economic fellow Vanessa Rossi.
“But the problem is, it is incredibly hard to predict what will happen. Even the geologists can’t tell us.”
Here’s the British Geological Survey’s page on the Icelandic volcanos.
UPDATE (9:15 a.m.): The Oil Drum, “The Possible Impact of the Icelandic Volcanoes on Energy Production“:
[There] should be a little concern for the wind turbines that are now dotted over the horizon. The concern is with the speed at which the tips travel through the air. The air, that looks clean, will contain small particles of very sharp glass and other volcanic ejecta, that are the primary cause for the grounding of aircraft across Europe. While the aircraft can see very sudden loss in engine power, because of the high speeds with which they encounter the clouds, and the volumes of debris sucked into engines that then fail. (There are also video explanations.)
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