How the Economy Weathered Katrina

Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com.

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Not too long after Hurricane Katrina punished Louisiana and Mississippi last year with 175 mph winds and vast flooding, government and independent analysts figured the property, infrastructure, oil rig and roads repair bill would amount to upwards of $120 billion.

Analysts, including my colleague Jim Jubak, said Katrina could tip our economy into recession, affecting everything from gas prices to grain shipments along the Mississippi. I noted that roughly 15% of all U.S. exports ship through the Port of South Louisiana, the nation's largest.

Cynical investors, meanwhile, salivated at the prospect of billions in rebuilding spending because it suggested profits would descend from the skies upon companies charged with rebuilding the region. But it really hasn't worked out that way.

Both the doomsayers and the speculators were disappointed. Our economy proved surprisingly resilient, so much so that the Federal Reserve had to continue jacking up interest rates for nearly a year after Katrina to control economic growth and inflation.

Sure, there were signs of trouble. Corporate profits fell by 4% in last year's third quarter, and GDP growth slipped to 1.8% in the fourth quarter, thanks in part to Katrina's impact. But the economy quickly got back on track. GDP growth hit 5.6% in the first quarter of this year, the fastest rate since 2003. Corporate profits are again growing at double-digit rates. All that even as crude prices have stayed above $70.

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The money has rained down, if not quite in the amounts envisioned. Claims related to the storm ended up costing the insurance industry around $41 billion, and lawmakers kicked in another $20 billion in taxpayer funds.