US retail, industrial sector struggling after Hurricane Harvey

  • 16/09/2017
Many markets have taken a hit from the storm.
Many markets have taken a hit from the storm. Photo credit: File

US 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.

Harvey, which lashed Texas in the last week of August, also has impacted the labour market. Hurricane Irma, which struck Florida last weekend, is also likely to hurt the economy, though analysts expect a rebound in the fourth quarter.

"The early returns from Harvey are trickling in and the news is not good," said Joel Naroff, chief economist at Naroff Economic Advisors in Pennsylvania. "Economists are likely marking down third-quarter growth and marking up the fourth quarter."

The Commerce Department said retail sales dropped 0.2 per cent last month, the biggest decline in six months as motor vehicle sales tumbled 1.6 per cent. Sales of building materials, electronics and appliances as well as clothing also fell.

Though Harvey likely depressed retail sales last month, data for July and June were revised down, suggesting a moderation in consumer spending after brisk growth in the second quarter.

Economists had forecast retail sales nudging up 0.1 per cent in August. While last month's drop in motor vehicle sales was the largest in seven months, the replacement of flood-damaged vehicles, especially in the Houston area, is expected to deliver a boost.

In a separate report on Friday, the Federal Reserve said industrial production declined 0.9 per cent in August. That was the biggest drop since May 2009 and followed six straight monthly gains.

The Fed attributed about 0.75 percentage points of the decline to storm effects that "temporarily curtailed drilling, servicing, and extraction activity for oil and natural gas."

Reuters

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