Industrial output last month fell 1.3% reflecting the effects of Hurricane's Katrina & Rita and the decline by far outpaced Consensus expectations for a 0.4% drop. Utility output (-0.9%) and mining output (-9.1%) again reflected the worst damage. Factory sector production fell a lesser 0.6% (+2.9% y/y).

The Federal Reserve indicated that storm-related production declines may have reduced the change in total industrial production about 1.7 percentage points and by nearly 0.4 percentage points in August. Additionally, the strike in the aircraft industry reduced the change in total industrial output by almost 0.5 percentage points.

Output of computers, peripheral equipment & semiconductors jumped 3.7% (24.6% y/y). Excluding the high tech sector factory output fell 0.9% (+1.6% y/y).

Output of appliances, furniture & carpeting rose 0.3% (4.1% y/y) but business equipment output dropped a sharp 3.7% reflecting a 24.3% drop in transit equipment and a 3.4% decline in defense & space.

Total capacity utilization fell sharply to 78.6% and capacity grew 1.1% y/y. Factory sector utilization fell to 77.9% while capacity rose 1.4% y/y.