Hurricanes Might Not Impact the Economy as Negatively as Anticipated
Early economic data for September from IHS Markit suggested the negative economic impacts of Hurricanes Harvey and Irma might have been somewhat overblown.
"The US economy showed encouraging resilience in a month of hurricane disruption," IHS Markit economist Chris Williamson said. Companies in the services sector slowed some, while manufacturing growth ticked up, IHS Markit wrote in flash results released Friday, Sept. 22, but overall private sector growth increased strongly.
The services sector had a flash business activity reading of 55.1, down from 56 in August. It's worth noting that August was the highest reading in 21 months and any figure above 50 is considered strong. The manufacturing purchasing managers' index increased fractionally to 53 from 52.8 last month.
The manufacturing sector was an "increasing drag on the economy," Williamson said. Services business was the main growth driver despite a slight retreat in growth rates this September. The average services business activity reading for the third quarter is set to reach 55.2, the highest since 2015.
Hurricane Harvey's biggest impact was on manufacturing supply chains, where "resultant supply shortages were a key driver of higher prices," Williamson said. "Supply delays were the most widespread in two and a half years, while input price inflation rose to the highest since 2012."
Overall growth rates in September are expected to fall in line with August, which was a seven-month peak. Data suggests the economy is on track to grow at an annualized rate of just over 2% in the third quarter, IHS Markit said.
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