Hurricane Harvey Clouds US Industrial Production

US industrial output fell in August for the first time since January as Hurricane Harvey battered oil, gas and chemical plants along the Gulf Coast and a cool summer sapped utility demand in the east, the Federal Reserve said on Friday.

Overall industrial production fell 0.9% over the month after a July increase revised upward to 0.4%, CNBC reported.

The storm, which slammed into the Gulf Coast in Texas and Louisiana late last month, accounted for 0.75 percentage point of the decline, the Federal Reserve said Friday. That suggests production would have slipped without the hurricane.

The Gulf Coast is home to many of the nation's oil refiners, and petroleum is a key component in the manufacturing of plastics and chemicals.

Manufacturing has picked up since last summer as the dollar has fallen in value, which makes US goods cheaper overseas, increasing exports. Manufacturing production fell 0.3% last month, though the Fed said that without the hurricane, it would have increased roughly 0.5%.

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

Still, the report illustrates how Harvey has disrupted the wider US economy. Jennifer Lee, senior economist at BMO Capital Markets, said the data included signs of weakness, even excluding the impact of Harvey. "The August decline was widespread," she said.

Lee cut her estimate for third-quarter economic growth to 2% at an annual rate, from an earlier forecast of 2.4%. A drop in retail spending last month was also a factor. But she also expects growth to rebound in the fourth quarter as rebuilding from Harvey and Irma gets underway.

Industrial production includes mining and utilities as well as manufacturing. Utility output tumbled 5.5% as milder temperatures on the East Coast reduced air-conditioning use.

And mining production fell 0.8% last month as Harvey temporarily shut down the drilling of oil and natural gas and refining operations.

Factory activity in New York has been strong in September after reaching a three-year high in August.

The Federal Reserve Bank of New York said Friday that it’s Empire State manufacturing index dipped to 24.4 in September, a level that still points to a brisk pace of growth for factories. The August reading of 25.2 had been the highest since September 2014.

New orders, shipments and hiring all increased this month. Manufacturers were also investing more in their plants and were confident that business would keep improving over the next six months.