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Economic Disrupt: Harvey’s Impact

Federal Reserve BHThe Federal Reserve’s Beige Book [1] published Wednesday, and according to the report’s national summary, economic activity increased at a “modest to moderate pace” across all 12 districts in July and August.

However, the Fed's report added a special note to address the impact of Hurricane Harvey on the economy. Prior to the natural disaster, activity in the energy and natural resources sector was generally positive. While it is too soon to determine the full impact of Harvey, the Fed reported that the natural disaster has, “created broad disruptions to economic activity along the Gulf Coast in the Dallas and Atlanta Districts.”

These disruptions include a noteworthy effect on the fuel and petrochemical production that caused 15 refineries in the regions to shut down. As some areas in the region experienced gasoline shortages, “supply was expected to remain tight in the Southeastern United States because of pipeline disruptions,” according to the Fed.

Despite Harvey, prices rose modestly overall across the country as input and materials costs generally increased, “most notably for freight, lumber, and steel.” Along with increases in input prices exceeding gains in selling prices, “home prices moved up overall, as low inventories put upward pressure on prices in many regions.“

The report noted that residential and commercial construction slightly increased, however, the low inventory of homes for sale has, “continued to weigh on residential real estate activity across the country, while commercial real estate activity increased slightly.”

Philadelphia's district reported modest growth in new home construction, while the Chicago district experienced increases in construction and real estate activity as well. In the Richmond district, real estate and construction were not as consistently positive. However, the district’s economy continued to expand modestly.

The Boston district residential real estate markets were affected by the inventory low. While the New York district housing markets strengthened, but commercial real estate markets were steady. In Atlanta district, home sales increased and prices continued to rise modestly.