(Adds third-quarter GDP estimate, analyst comments, updates markets)
* Retail sales fall 0.2 percent in August
* July and June retail sales revised lower
* Core retail sales drop 0.2 percent
* Industrial production tumbles 0.9 percent
By Lucia Mutikani
WASHINGTON, Sept 15 (Reuters) - U.S. retail sales unexpectedly fell in August and industrial output recorded its biggest drop since 2009 as Hurricane Harvey disrupted activity, suggesting the storm could dent economic growth in the third quarter.
Harvey, which lashed Texas in the last week of August, also has impacted the labor market. Hurricane Irma, which struck Florida last weekend, also is likely to hurt the economy, though analysts expect a rebound in the fourth quarter.
"The early returns from Harvey are trickling in and the news is not good," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "Economists are likely marking down third-quarter growth and marking up the fourth quarter."
The Commerce Department said retail sales dropped 0.2 percent last month, the biggest decline in six months as motor vehicle sales tumbled 1.6 percent. Sales of building materials, electronics and appliances as well as clothing also fell.
While noting that it could not isolate the impact of Harvey on retail sales, the department said it received indications from companies that the hurricane had "both positive and negative effects on their sales data while others indicated they were not impacted at all."
Though Harvey likely depressed retail sales last month, data for July and June were revised down, suggesting a moderation in consumer spending after brisk growth in the second quarter.
Economists had forecast retail sales nudging up 0.1 percent in August. While last month's drop in motor vehicle sales was the largest in seven months, the replacement of flood-damaged vehicles, especially in the Houston area, is expected to deliver a boost.
Overall retail sales increased 3.2 percent in August on a year-on-year basis. Excluding automobiles, gasoline, building materials and food services, retail sales fell 0.2 percent last month after an unrevised 0.6 percent increase in July.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.3 percent annualized rate in the second quarter. That boosted GDP growth to a 3.0 percent rate in the April-June period.
U.S. stocks inched up to record highs, while prices of U.S. Treasuries slipped. The dollar fell against a basket of currencies.
In a separate report on Friday, the Federal Reserve said industrial production declined 0.9 percent in August. That was the biggest drop since May 2009 and followed six straight monthly gains.
The Fed attributed about 0.75 percentage point of the decline to storm effects that "temporarily curtailed drilling, servicing, and extraction activity for oil and natural gas."
Economists expect industrial output to decline further in September, with Irma likely weighing on utilities.
"Food processing is also going to join the list of the walking wounded because South Florida grows and processes a lot of food," said Michael Montgomery, a U.S. economist at IHS Markit in Lexington, Massachusetts.
Other data from the New York Fed on Friday showed its index of factory activity in New York state remained at lofty levels in September amid strong orders growth, indicating that manufacturing remains on solid ground apart from the storm-related distortions.
The weak retail sales and industrial output reports prompted the Atlanta Fed to slash its third-quarter GDP estimate to a 2.2 percent rate from a 3.0 percent pace.
The data, however, did little to change expectations that the Fed will announce a plan to start shrinking its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its Sept. 19-20 policy meeting.
The U.S. central bank is expected to raise interest rates again only in December. It has increased borrowing costs twice this year.
Despite sluggish wage growth, even as the labor market nears full employment, the fundamentals for consumer spending are solid. In addition to the strong stock market, house prices have continued to rise.
Last month, sales at building material stores fell 0.5 percent after surging 0.9 percent in July. Clean-up and rebuilding in the aftermath of Harvey and Irma could buoy sales of building materials in September.
Receipts at service stations increased 2.5 percent in August, reflecting higher gasoline prices. Sales at electronics and appliance stores fell 0.7 percent and receipts at clothing stores dropped 1.0 percent after rising 0.5 percent in July.
Sales at online retailers declined 1.1 percent in August, the biggest drop since April 2014. That was likely payback following a 1.8 percent surge in July, which was driven by Amazon.com's Prime Day promotion. Receipts at restaurants and bars rose 0.3 percent and sales at sporting goods and hobby stores edged up 0.1 percent. (Reporting by Lucia Mutikani; Additional reporting by Howard Schneider; Editing by Paul Simao)