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Post- Hurricane Rebound Fuels Industrial Output Increase

Nov. 16, 2017
Industrial production rose 0.9% in October, nearly twice what economists were expecting.

Output at U.S. factories continued to rebound in October as oil refineries and petrochemical plants ramped up production after the severe disruption from Hurricane Harvey, according to data released on Nov. 16.

The post-Harvey rebound fueled industrial production to its biggest one-month rise since April as factories made up for weeks in August and September when they sat idle as a result of the storm, according to the Federal Reserve report.

In addition, the hit to output in August and September appeared less severe than originally reported.

Meanwhile, industrial capacity in use last month hit its highest level in more than two years.

Industrial production rose 0.9% in October from September, nearly twice what economists were expecting, and after a gain of 0.4% in the prior month.

The lion's share of the October gain was attributed to the storm-related rebound at oil refineries, petrochemical plants and plastic resin facilities in Southeast Texas, according to the Fed.

Excluding the effects of the storm, industrial output rose by only 0.3%.

Economists predict the final quarter of 2017 will see a bump in economic activity as millions of people in Florida and Texas resume work and continue rebuilding, and as Gulf Coast industry rattles to life after the back-to-back hurricanes in the late summer.

Upward revisions for July through September showed output lost only 0.3%, rather than the 1.5% drop the Fed had previously reported.

Industrial capacity in use rose in October to 77%, the highest since April, better than a consensus analyst forecast but still 2.9 percentage points below the long-run historical average since 1972.

Ian Shepherdson of Pantheon Macroeconomics said the October jump was surprisingly strong but that noisy data could be cloud interpretation.

"Overall, we think the industrial sector is in decent shape, but it's dangerous to read too much into data for a single month when the key driver of activity is a rebound from a weather event," he wrote in a client note.

Copyright Agence France-Presse, 2017

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