Texas chainstore massacre as Harvey batters retail sales
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.
The storm, which lashed Texas in the last week of August, also has impacted the labour market. Economists, however, expect a rebound in the fourth quarter.
“Harvey’s fingerprints were all over the August retail sales and industrial production reports this morning,” said Scott Anderson, chief economist at Bank of the West, San Francisco.
The Commerce Department said retail sales dropped 0.2pc last month, the biggest decline in six months. While Harvey weighed on sales in August, data for July and June were revised down. Economists had forecast retail sales nudging up 0.1pc.
Motor vehicle sales tumbled 1.6pc last month, the biggest drop since January, after being unchanged in July. Harvey, which unleashed unprecedented flooding in Houston, probably cut into sales of cars.
Auto sales are expected to get a boost from the replacement of flood-damaged vehicles. Overall retail sales rose 3.2pc in August on a year-on-year basis, pointing to underlying strength in domestic demand.
The US Commerce Department said while it could not isolate the impact of Harvey on retail sales, it had received indications from companies that the hurricane had “both positive and negative effects on their sales data while others indicated they were not impacted at all.”
Excluding cars, petrol, building materials and foodservices, retail sales fell 0.2pc last month after an unrevised 0.6pc increase in July. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Last month’s drop suggested consumer spending could slow in the third quarter.
In a separate report yesterday, the Federal Reserve said industrial production fell 0.9pc in August. That was the biggest drop since May 2009 and followed six straight monthly gains.
The Fed attributed about 0.75 percentage point of the decline to storm effects that “temporarily curtailed drilling, servicing, and extraction activity for oil and natural gas”.
US stocks were largely flat in morning trading while prices of US Treasuries were weaker. The dollar fell against a basket of currencies.
The weak retail sales and industrial output reports will probably do little to change expectations that the Fed will announce a plan to start shrinking its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its September 19-20 policy meeting. (Reuters)
Rescuers in a boat move down a street covered in floodwaters from Hurricane Harvey in Texas