Katrina's Impact Could Slow Economy by 1%, CBO Says

urricane Katrina could lead to the loss of 400,000 jobs, cut economic growth by as much as a 1% this year and result in a 40% spike in gasoline prices, according to a report by the Congressional Budget Office issued Wednesday.

he CBO report said Katrina will have a greater impact than previous storms but should not be serious enough to push the country into a recession, the Associated Press reported.

CBO said overall economic growth, as measured by the gross domestic product, could be reduced by 0.5% and a 1% point for the second half of this year, but it said this downshift in growth should be temporary as long as gasoline prices retreat to pre-Katrina levels.

he agency, which reports to Congress, cautioned that the “significant but not overwhelming” blow the economy will suffer would be decidedly more serious if energy supply disruptions along the Gulf Coast last longer than expected.

“Last week, it appeared that larger economic disruptions might occur, but despite continued uncertainty, progress in opening refineries and restarting pipelines now makes those larger impacts less likely,” CBO Director Douglas Holtz-Eakin wrote in a letter to Senate Majority Leader Bill Frist (R-Tenn.) and other congressional leaders.