Hurricane Harvey caused 'broad disruptions'

Hurricane Harvey caused "broad disruptions" to economic activity in the US Gulf Coast region, causing gasoline shortages and spiking freight costs, the Federal Reserve said Wednesday.

However, it was still too soon to measure the full extent of the impact caused by the storm, according to a periodic Fed survey on economic conditions.

More broadly, the US economy continued to grow at "a modest to moderate pace" during July and August, with tight labor markets but disappointing auto sales, the survey showed.

Harvey left a fifth of oil and gas production in the Gulf of Mexico temporarily offline and shuttered 15 refineries, according to the "beige book" survey, which gathers reports from local business contacts near the 12 regional central banks nationwide.

"Some areas experienced gasoline shortages and supply was expected to remain tight in the southeastern United States because of pipeline disruptions," the report said in a note on the hurricane.

"Activity in the energy and natural resources sector was generally positive prior to shutdowns arising from Hurricane Harvey," the survey said.

"Contacts in the Richmond District indicated that spot freight prices jumped after the storm, as freight was being redirected around the country," it added.

Current damage estimates for the monster storm, which made landfall in Texas August 26, vary from around $50 billion to well in excess of $100 billion.

But analysts say it could be a year before more precise costs and losses are known and Wednesday's Fed report noted it was "too soon to gauge the full extent of the impact."

Nationwide, the Fed's 12 districts portrayed an economy in which recent trends were uninterrupted but "contacts in many districts expressed concerns about a prolonged slowdown in the auto industry."

Automakers have seen moribund sales so far this year after a record 2016, except for trucks and SUVs.

Growth on jobs markets continued but appeared to slow in most districts.

"There were reports of worker shortages in numerous industries, most notably in manufacturing and construction," the report said.

- Wages refuse to budge -

"Firms in the Atlanta, St Louis and Minneapolis districts said they had turned down business because they could not find the necessary workers. Many districts indicated businesses were having difficulty filling openings at all skill levels."

Nevertheless, the anecdotal reports of labor shortages were for the most part not translating into higher wages, the Fed said.

The Labor Department reported this month that the unemployment rate rose marginally last month to 4.4 percent, quite low by historic standards, but job gains slowed to 156,000 net new positions amid sluggish wage growth.

Policymakers and economists have been baffled by persistently weak inflation in the United States despite steady job creation and falling unemployment.

This has created disagreements among Fed members about the need to hike interest rates in the short term after raising the benchmark rate twice already this year.

The beige book survey, prepared ahead of the Fed's next policy meeting September 19-20, said this conundrum continued, with "the majority" of Fed districts reporting "limited wage pressures and modest to moderate wage growth."

In the Boston region, staffing firms saw falling revenues, "which they blamed on limited labor supplies" but prices rose "very little."

The Cleveland region was the exception, however, reporting rising employment and wages in construction and manufacturing, even as motor vehicle production trended lower.

"Higher wages were attributed to growing employee turnover" in the Cleveland Fed's area, the report said.

Residential construction rose in the Minneapolis area but was held back by "tight labor." At the same time, low housing inventories caused lagging home sales while farmers suffered from drought.

source: AFP