Implications: Following six straight monthly gains, industrial production in August declined the most for any month since 2009. However, the overall 0.9% decline was mostly due to Hurricane Harvey, with the Federal Reserve saying the storm reduced both overall production and manufacturing in particular by roughly 0.75%. The other big negative in today's report was for utilities, which fell 5.4%, primarily due to mild temperatures reducing demand for air-conditioning on the East Coast. Excluding these effects – Harvey and mild temperatures in the East –industrial production would have been up close to 0.5% in August, which is consistent with the 1.6% gain in the past year. Remarkably, auto production rose 2.2% in August. Look for a bounce in overall production in the months ahead once the effects of Hurricane Irma also filter through the data and weather patterns return to normal. In the meantime, it'll be a rocky ride. Take mining, which fell 0.8% in August, held back by drilling and well service activity. Harvey knocked oil and gas-well drilling down 4.7% in August, although it's still up a massive 86% from a year ago. Look for a bounce back in drilling activity in the months ahead once the effects of the storms pass. In other news this morning, the Empire State index, a measure of manufacturing sentiment in New York, fell to a still very high 24.4 in September from 25.2 in August, showing continued strength in the factory sector.
Click here for PDF version