U.S. industrial output, sapped by Harvey, falls for first time since January

Skies darken and rain batters Miami Florida

U.S. retail sales unexpectedly fell in August and industrial output recorded its biggest drop since 2009 as Hurricane Harvey disrupted activity, suggesting the storm could dent economic growth in the third quarter.

The storm, which slammed into the Gulf Coast in Texas and Louisiana late last month, lowered industrial production by about 0.75 percentage point, the Federal Reserve said Friday.

"The August decline was widespread, with only the auto industry surprisingly gaining in the month", she said.

Economists had expected production to inch up by 0.1 percent compared to the 0.2 percent uptick originally reported for the previous month.

Industrial production includes mining and utilities as well as manufacturing.

Hurricane Harvey, which battered the US Gulf Coast in August, led to the shutdown of several oil refineries, which was one of the factors dragging on output.

The report also said capacity utilization for the industrial sector slid to 76.1 percent in August from 76.9 percent in July. After Hurricane Katrina devastated New Orleans in September 2005, industrial production fell sharply but recovered in subsequent months.

Manufacturing output also dipped by 0.3 percent in August after coming in unchanged in the previous month. Utility output tumbled 5.5 percent as milder temperatures on the East Coast reduced air conditioning use.

"Output should bounce back once the storm-related disruptions fade, but with Hurricane Irma striking in September, it is unclear when this will occur", J.P. Morgan Chase economist Daniel Silver said in a note to clients. 'Economists are likely marking down third-quarter growth and marking up the fourth quarter'.

And a survey of manufacturing firms that preceded Harvey found that factory activity rose to a six-year high in August.



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