Canada could be one of the few economic beneficiaries of the fallout from Hurricane Katrina, according to a new report from BMO Nesbitt Burns.

BMO Nesbitt suggests that, “the damage from Katrina and its immediate aftermath will likely reduce U.S. real GDP growth by one-half to one full percentage point in the third and fourth quarters of this year. By the second half of 2006, however, the rebuilding will likely spur growth by more than the initial economic loss.”

The cost of clean-up and reconstruction has been roughly estimated to be between US$150 billion and US$200 billion, it notes.

“Usually, hurricanes reduce growth in the first instance, but the loss is offset in coming quarters by the surge in activity associated with rebuilding. But, as in many things, Katrina was not the usual hurricane,” the report explains. “The destruction and disruption to the oil refineries, the Louisiana Offshore Oil Port and the port of New Orleans spreads the effect of the hurricane around the world. This has increased global economic fragility.”

In response, there was a big rise in refined oil product prices, which Nesbitt notes shifts income from consumers to producers, and so from net importing countries to net exporters. “Canada is a net exporting country, and though the provinces of Ontario and Quebec are hard hit by the rise in oil product prices, Alberta will continue to boom,” it says. “This is a net positive for our trade surplus, current account surplus, federal budget surplus, the Canadian dollar and ultimately, possibly for overall GDP growth.” Although this will further exacerbate the gap in economic performance between Alberta and the country’s manufacturing base.

BMO Nesbitt notes that the rebuilding of the Gulf Coast region will significantly increase the demand for lumber, steel, copper and other building materials. “Lumber prices are up 13% since Katrina hit. Steel prices are expected to increase sharply. Again, Canada is a winner in these developments as well,” it says. “The TSX will continue to outperform the S&P 500 in nominal terms, because of the disproportionately large weightings of the energy, materials and forest product sectors in Canada. In exchange-adjusted terms, the TSX will outperform even more.”

“While Canada is among the short list of relatively lucky countries, the negative economic impact of Katrina is felt around the globe,” it says, noting that net oil importers will be hugely vulnerable to the further rise in energy product prices. “Indonesia and Italy had already been burdened and strained under the effect of high oil prices before the storm disrupted energy markets.”

“In Indonesia, the largest economy in Southeast Asia, worries over fuel subsidies helped push the rupiah to its lowest level in four years last week, forcing officials to raise interest rates and pledge politically explosive fuel-price increases. On Friday, the government debt of Indonesia was downgraded, reminiscent of the Asian Crisis in 1997-98,” it says. “India is suffering under similar burdens.”

“In Italy, truckers who deliver new cars to dealerships recently walked off their jobs for more than a month in protest to higher diesel prices. This forced Fiat to temporarily shutter all of its Italian factories,” the report adds. ”Manufacturers in the rest of Europe are also feeling the pinch, which could derail the nascent economic recovery.”

“In this environment, the Canadian economy and Canadian investments will look increasingly attractive,” the report concludes.