Last week’s results show that confounding is possible for correlations of Household and Nonprofit Organization (HNO) Credit changes and Nonfinancial Corporate (NFC) Debt changes with subsequent CPI inflation changes.1 This post adds some detail to those observations.
Image by Arvid Olson from Pixabay
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
Sun Aug 04 2024
Valid 12Z Sun Aug 04 2024 – 12Z Tue Aug 06 2024…Tropical Storm Debby is expected to cause considerable Flash and Urban
Flooding, life-threatening storm surge, and strong winds across portions
of Florida and the Southeast Coast beginning today……Excessive Rainfall and Severe Thunderstorms possible from the Upper
Midwest across the Great Lakes and into the interior Northeast on Monday
and Tuesday…Tropical Storm Debby is currently forecast to strengthen while it tracks
along Florida’s Gulf Coast today. Debby may intensify into a Hurricane
Monday morning before making landfall near Florida’s Big Bend region,
where a Hurricane Warning is in effect. Life threatening storm-surge
inundation is possible along portions of Florida’s Gulf Coast from Aripeka
to Indian Pass. Strong winds will likely cause significant damage to
unprotected infrastructure along the storm’s path. There’s a potential for
isolated tornadoes across western and northern portions of the Florida
Peninsula through Monday, which is consistent with the Storm Prediction
Center’s convective outlooks, which depict Slight Risks (level 2/5) of
Severe Thunderstorms for those days. There is a Moderate Risk (at least
40%) of Excessive Rainfall leading to Flash Flooding across portions of
northwestern Florida today where the bulk of Debby’s precip shield will
cause impacts. Debbie is forecast to slow and cause considerable to
historic Flash, Urban and river Flooding across portions of northern
Florida through southeastern Georgia and into coastal South Carolina on
Monday and Tuesday. Flood Watches are in effect for parts of coastal
Georgia and South Carolina. For more information go to hurricanes.govElsewhere, a low pressure system, emerging from the Northern High Plains,
will produce scattered showers and thunderstorms across the Northern
Plains tonight before spreading storms into the Upper Midwest, Great Lakes
and interior Northeast on Monday. There’s a Slight Risk (at least 15%) of
Excessive Rainfall as well as a Slight Risk (level 2/5) of Severe
Thunderstorms over portions of the Upper Midwest/Great Lakes on Monday.
Downstream of this, the attendant stationary front draped across the
interior Northeast will be the focus for more severe storms from Lake Erie
to New England where another Slight Risk of Severe Thunderstorms is in
effect.High temperatures will be below average across the northern tier states
this week in response to unsettled weather associated with the
aforementioned storms in the Northern Plains. Temperatures in the
Central/Southern Plains and Middle/Lower Mississippi Valley will be above
average as southerly flow persists out ahead of the descending cold front
to the north. Numerous warm overnight lows may tie or break existing
records in the Desert Southwest over the next couple of nights. Monsoonal
rain continues over portions of the Southwest and Four Corners region this
week with isolated Flash Flooding possible over vulnerable surfaces
including burn scars and slot canyons.
| American Monsoons |
 |
NOAA/ National Weather Service
NOAA Center for Weather and Climate Prediction
Climate Prediction Center
5830 University Research Court
College Park, Maryland 20740
Page Author: Climate Prediction Center Internet Team
HERE is a link for more information on Monsoons.
| The above is pretty interesting because it shows that what we call The Monsoon (with the use of different names) is a process that impacts the Northern Hemisphere in the summer and South America in their summer. Very few people are aware of this. The above shows this. For South America, their Monsoon occurs over a period of time first impacting the Amazon Basin and then the La Plata Basin. I only mention this because the Monsoon is a more significant weather pattern than most realize. I found this graphic to be hard to decipher but did not have time to find a better one. But you can see the change in direction of the wind which is the definition of a monsoon namely a seasonal change in the direction of the prevailing wind. |
Now we will focus on the North American Monsoon (NAM)
The organization CLIMAS is an expert in this area and they recently issued an update report. Most of the rest of this article is taken from their report but they had a couple of three-month forecast slides which I have replaced with what NOAA issued on July 31, 2024, so they are a bit more current.
Where I have comments on their slides my comments are in boxes.
Short Range Forecast Discussion NWS Weather Prediction Center College Park MD Sat Aug 03 2024 Valid 12Z Sat Aug 03 2024 - 12Z Mon Aug 05 2024 ...A dangerous heat wave shifts from the Paciifc Northwest to the Great Plains... ...Stormy conditions and flash flood potential across portions of the Eastern U.S. this weekend... ...Potential Tropical Cylone Four will bring hazardous rainfall, strong winds and life threatening storm surge inundation to portions of Florida this weekend... Upper-level ridging over the West will promote above average temperatures across the region this weekend. Upper troughing over the East Pacific will work in combination with the Western ridge to produce high temperatures in the upper 90s to low 100s across much of the Northwest into the Northern/Central Plains today. Warm overnight lows in the upper 60s to low 70s will represent 20-30 degree anomalies for much of the Northern Great Basin/Rockies/High Plains tonight. The lack of overnight relief from the heat will affect anyone without effective cooling and/or adequate hydration. A small bit of mid-level energy will contribute to a severe thunderstorm threat over the Northern Plains and Upper Midwest this afternoon/evening. Damaging winds, isolated Flash Flooding and hail will be the primary threats there. Shortwave energy spinning across the northern periphery of a mid-level closed high pressure bubble will bring some scattered showers, thunderstorms and cooler temperatures to the northern tier of the country beginning on Sunday. Meanwhile, warm air shifts into the Central Plains and Middle Mississippi Valley through early next week. Elsewhere, upper troughing over the Ohio/Tennessee Valley will promote scattered thunderstorms up and down the East Coast today. Slight Risks of Excessive Rainfall and Severe Thunderstorms are in effect from the Tri-State area down to the Florida Panhandle. Damaging wind gusts and Flash Flooding will be the primary concerns from these storms. Some lingering showers and thunderstorms are expected on Sunday with only an isolated threat of severe storms and Flash Flooding across the coastal Mid-Atlantic/Northeast. Tropical Depression Four is forecast to strengthen into a Tropical Storm as it tracks west of the Florida Peninsula this weekend. Heavy rainfall, strong winds and life threatening storm surge inundation are all possible along the western coast of the state beginning today. Heavy rainfall, strong winds and storm surge are also possible over northern Florida and the Southeast U.S. Coast Sunday evening into early next week. Tropical Storm Warnings and Storm Surge Watches are in effect along Florida's Gulf Coast while Tropical Storm Watches extend farther out across the other Gulf Coast states. For more information go to hurricanes.gov.
*Stock data, cryptocurrency, and commodity prices at the market closing.
The US stock market experienced a significant downturn today following the release of the July jobs report, which indicated further cooling in the labor market. This development has intensified concerns about a potential recession and raised questions about the Federal Reserve’s interest rate strategy. Key points from the market reaction:
Economic concerns:
Interest rate expectations:
Tech sector impact:
Broader economic indicators:
The market reaction reflects growing uncertainty about the economic outlook and concerns that the Federal Reserve’s monetary policy may be too restrictive, potentially risking a “hard landing” for the economy.
The unemployment rate rose to 4.3% in July 2024, and nonfarm payroll employment grew by 114,000 – the second-worst growth this year. Employment continued to trend up in health care, in construction, and in transportation and warehousing, while information lost jobs (see employment change bar chart in second graph below). The household survey (which produces the unemployment rate) shows employment growth of only 67,000 – versus the headline establishment survey’s 114,000 (see red bar on graph below). Further, the primary reason for the significant jump in the unemployment rate is because the household survey added 420,000 people to the workforce – not that a lot of people lost their jobs. Looking at the employment-population ratio which has been worsening since April 2024, it declined this month and remains below the levels seen from 2018 to 2020. Also from the establishment survey, Over the last year – the number of people unemployed has increased 380,000 or 21% year-over-year. To say the economy is stumbling at this point may turn out to be an understatement.
Contrary to the June 2024 Federal Reserve Industrial Production 1.1% year-over-year growth, the US Census manufacturing data shows new orders for manufactured goods in June 2024 declined 5.2% year-over-year. This data moves industrial production into a significant recession in June 2024, and early data has July 2024 manufacturing data also in a recession. Remember that imports are increasing which only suggests that despite the current policy to increase US manufacturing – manufacturing is leaving the country.
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
Fri Aug 02 2024
Valid 12Z Fri Aug 02 2024 – 12Z Sun Aug 04 2024…A dangerous heat wave will impact much of the East Coast, Southeast and
Northwest through tonight……Excessive Rainfall concerns across portions of the Eastern U.S. this
weekend……Monsoonal storms continue across the Southwest/Four Corners through the
weekend…A familiar upper-level pattern over the lower 48, with ridging in the West
and troughing over the Great Lakes and Ohio/Tennessee Valley, will support
heat waves and excessive rainfall concerns this weekend. High temperatures
in the 100s will represent a 10-15 degree positive anomaly across the
Northwest today. Some of these temperatures will tie or break records.
Overnight temperatures in the upper 60s to upper 70s will tie or break
widespread temperature records across the West tonight as well. The
combination of very hot daytime conditions and a lack of overnight relief
could harm those without adequate shelter or hydration. Cloudy conditions
will support near record breaking warmth over portions of the coastal
Northeast and Florida peninsula tonight.Showers and thunderstorms will develop along a cold front moving through
the Midwest today and spread eastward toward the East Coast. Slight Risks
of Excessive Rainfall leading to Flash Flooding are in effect for portions
of the Lower Great Lakes, Ohio Valley and Northeast today due to the
higher rates within some of the storms that move through those areas.
Orographic lift over portions of the Central/Southern Appalachians will
promote additional Flash Flooding concerns, hence another Slight Risk area
for parts of eastern Tennessee, southeastern Kentucky, southwestern
Virginia, western North Carolina and northern Alabama/Georgia. The cold
front slows down across the Mid-Atlantic/Southeast on Saturday and becomes
the focus for additional Excessive Rainfall concerns, due in part to a
significant moisture plume from the Tropics. A Slight Risk of Excessive
Rainfall is in effect for portions of southeastern Virginia down into the
Carolina/Georgia Piedmont.A tropical disturbance is forecast to impact the Florida Peninsula
beginning late tonight when heavy rainfall and thunderstorms are supposed
to spread across southern Florida and eventually work their way up the
peninsula on Saturday. A Slight Risk of Excessive Rainfall is in effect
for portions of southern Florida on Saturday as a result. Monsoonal
moisture is expected to continue flowing into the Southwest/Four Corners
region this weekend. Scattered showers and thunderstorms may lead to
isolated Flash Flooding across portions of the aforementioned areas,
particularly burn scars and slot canyons.
US stocks experienced significant selling pressure on Thursday, with all three major indexes falling sharply. Here’s a summary of the key points:
This sell-off highlights the market’s sensitivity to economic data and suggests that investors are becoming more concerned about economic growth rather than just focusing on potential rate cuts.
U.S.-based employers announced 25,885 job cuts in July 2024, a 47% decrease from the 48,786 cuts announced one month prior – but up 9% from the 23,697 cuts announced in the same month in 2023. Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc. perspective:
The job market is indeed cooling, with hiring at the lowest point in over a decade. While we are seeing increased cuts in manufacturing sectors, both consumer and industrial, most industries are cutting below last year’s levels.
Construction spending during June 2024 is 6.2% above June 2023 estimate – but this is down from the 7.1% year-over-year in the previous month. Spending on private construction was up 5.9% year-over-year but down from the 6.5% growth in the previous month. Public construction was up 7.3% year-over-year but down from the 9.3% seen the previous month. Unfortunately, construction continues to slow even though it remains one of the bright spots in the U.S. economy.
The Manufacturing PMI® registered 46.8% in July 2024,down 1.7 percentage points from the 48.5% recorded in June. A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. The New Orders Index remained in contraction territory, registering 47.4%, 1.9 percentage points lower than the 49.3 percent recorded in June. The July reading of the Production Index (45.9 percent) is 2.6 percentage points lower than June’s figure of 48.5 percent. Just one more nail in the manufacturing coffin indicating it has slid into a recession.
In the week ending July 27, the advance figure for seasonally adjusted initial unemployment claims 4-week moving average was 238,000, an increase of 2,500 from the previous week’s unrevised average of 235,500. Initial unemployment claims remain in territory associated with an expanding economy.
Nonfarm business sector labor productivity increased 2.7% year-over-year in the second quarter of 2024 with unit labor costs increasing 0.5% year-over-year. Note that the trends are that both productivity and unit labor costs are moderating – however with productivity growth being significantly higher than labor cost growth, it helps the U.S. competitive position.
NFIB’s July jobs report found a seasonally adjusted net 33% of small business owners reported raising compensation in July, down five points from last month and the lowest reading since April 2021. A net 18% (seasonally adjusted) plan to raise compensation in the next three months, down four points from June. NFIB Chief Economist Bill Dunkelberg stated:
Fewer small business owners are planning to raise compensation in the coming months, and plans to hire remain stable,. July marks the second month of net gains in employment on Main Street, and the number of firms with open positions remains exceptionally high.
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
There have been some significant changes in the Outlook for August and these are addressed in the NOAA Discussion so it is well worth reading. We provided the prior Mid-Month Outlook for August for comparison. It is easy to see the substantial changes in the weather outlook by comparing the Mid-Month and Updated Maps.
The article includes the Drought Outlook for August. NOAA also adjusted the previously issued Seasonal (ASO) Drought Outlook to reflect the changes in the August Drought Outlook. We also provide the Week 2/3 Tropical Outlook for the World.
The best way to understand the updated outlook for August is to view the maps and read the NOAA discussion. I have highlighted the key statements in the NOAA Discussion.
| It is important to remember that the maps show deviations from the current definition of normal which is the period 1991 through 2020. So this is not a forecast of the absolute value of temperature or precipitation but the change from what is defined as normal or to use the technical term climatology.
It is a substantial change from what was issued on July 18, 2024. Remember, it is the first set of maps that are the current outlook for August. One expects some changes 13 days later. However, the changes to the updated August Outlook are significant, particularly with respect to precipitation. This then gives us some reason to question the (July 18, 2024) three-month ASO temperature and precipitation Outlooks which are shown in the following graphic. |
The top pair of maps are again the Updated Outlook for the new month. There is a temperature map and a precipitation map. The bottom row shows the three-month outlooks which includes August the new month. I think the outlook maps are self-explanatory.
To the extent that one can rely on a forecast, we would conclude that September and October will be very different than August, especially for precipitation. You can subtract Augusts from the three-month Outlook and divide by two to get a combined September-October Outlook.However given the major change in the new August outlook from what was issued on July 18, 2024, we might not trust the Seasonal Outlook issued on July 18, 2024. Something to think about. But the major factor is the projected slower onset of La Nina. Thus this change is consistent with the pattern the NOAA has been predicting although they have been playing catch-up. |
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
Thu Aug 01 2024
Valid 12Z Thu Aug 01 2024 – 12Z Sat Aug 03 2024…Dangerous heat engulfs much of the country as one heatwave continues
from the Southern Plains to the Southeast/Mid-Atlantic and another begins
in the West……Severe weather and flash flooding expected for portions of the Midwest
Thursday…… Locally heavy monsoonal shower and thunderstorm chances continue for
the Southwest…Widespread, dangerous heat will unfortunately be the main weather story
for much of the country this week as one heatwave continues for the
Plains, Middle/Lower Mississippi Valley, Southeast, and Mid-Atlantic, and
another heatwave begins over portions of the West. A strong upper-level
ridge will remain in place over the southern-tier of the U.S. the next
couple days, allowing for high temperatures to reach into the low 100s
over portions of the Southern Plains/High Plains, the upper 90s to low
100s for the Lower Mississippi Valley, and the upper 90s for the Southeast
into the southern Mid-Atlantic. High humidity values for areas east of the
High Plains will bring heat indices into the 105 to 110 degree range,
potentially as high as 115 for parts of the Lower Mississippi Valley, with
many areas under heat-related advisories or warnings. The combination of
hot temperatures/high heat indices, as well as very warm morning lows only
dropping into the mid- to upper 70s, will be dangerous to anyone without
access to adequate air conditioning. Temperatures warming into the upper
80s/low 90s with periods of higher humidity will lead to some muggy,
potentially dangerous conditions for portions of New England as well,
particularly on Friday. An approaching cold front will bring relief to
northern portions of the Southern Plains and Middle Mississippi Valley on
Friday, with the expectation the heat wave will begin to wane for most
locations through the weekend.In the West, an upper-level ridge will also begin to build northward,
sending high temperatures across much of the northern tier of the West
10-20 degrees above mid-Summer averages. Forecast highs Thursday are into
the upper 90s/low 100s for the inland Pacific Northwest/northern Great
Basin and mid- to upper 90s for the northern Rockies/High Plains.
Temperatures will get even hotter on Friday, with highs into the low to
mid-100s for most locations. Many near record-tying/breaking highs are
possible. Similar to areas further east, many heat-related advisories and
warnings have been issued as this heat will also reach dangerous levels
for the general public. Smoke from area wildfires will also continue to
plague parts of the region, resulting in hazy conditions and poor air
quality, and the risk for more wildfires will increase as the hot, dry
conditions settle in.An upper-level low/accompanying surface frontal system traversing the
northern side of the ridge over the southern tier of the U.S. will bring
another round of showers and thunderstorms to the Midwest Thursday. High
surface moisture leading to very strong instability will support intense
thunderstorm development through the afternoon across the warm sector
ahead of an approaching cold front, with lingering outflow boundaries from
overnight convection helping to trigger individual and clusters of storms.
Sufficient shear with the passing upper-level wave will lead to the threat
of severe weather, with a Slight Risk (level 2/5) from the Storm
Prediction Center covering Illinois, Indiana, Kentucky, and southwestern
Ohio, mainly for the threat of some damaging winds. The threat for some
intense downpours given the high moisture/strong storms, and potential for
some more widespread, organized clusters of storms, will lead to some
heavier rainfall totals and the risk for flash flooding. Many of these
locations have seen recent heavy rainfall given repeated rounds of
organized storms passing through, leading to wetter antecedent conditions
more sensitive to any additional rainfall. A Slight Risk of Excessive
Rainfall (level 2/4) covers much of same region from northeastern Illinois
southeast through Indiana/western Ohio and into eastern Kentucky. Some
slow moving storms producing heavy rainfall under the passing upper-low
may also lead to some flash flooding, with the Slight Risk extending
northwest into southern Wisconsin. Some more isolated storms will be
possible further east into the Appalachians and Mid-Atlantic Thursday.
Additional storms will be possible across the region Friday as the system
shifts eastward, with a greater chance of storms spreading into the
Appalachians and the Mid-Atlantic. Some isolated severe storms and
instances of flash flooding will be possible. A lingering upper-level
weakness will lead to scattered showers and thunderstorms over Florida and
portions of the Southeast Thursday, with moderate to locally heavy
rainfall possible, especially over the Florida Peninsula. More widely
scattered storms will remain possible Friday.Persistent Monsoonal conditions over the Southwest will continue to bring
daily shower and thunderstorm chances. Sufficient moisture across the
region will lead to the threat for some locally heavy downpours and an
isolated flash flooding, particularly over terrain sensitive areas such as
burn scars. A lingering frontal boundary will lead to some storms over
portions of the southern High Plains as well on Thursday, and a subtle
upper-level wave along the edge of the upper-ridging will bring storm
chances northwestward into portions of California Friday, particularly in
vicinity of the Sierra Nevada. Similar to areas further north, forecast
high temperatures more broadly in the region will be trending hotter and
above average, with 90s and low 100s for most locations outside of the
California Coast, and mid-100s to low 110s for the Desert Southwest.
Nvidia (NVDA) stock experienced a significant rally of nearly 13% on Wednesday, driven by several positive factors<:
The rally came after a period of decline, with Nvidia’s stock having dropped more than 20% from its June peak. Morgan Stanley analysts identified five main factors contributing to the recent decline: spending strategies, competitive pressures, export limitations, supply chain anxieties, and valuation concerns. However, they believe that despite these issues, the earnings environment is likely to remain strong for Nvidia and the AI sector as a whole. Despite recent fluctuations, Nvidia’s stock has shown impressive growth in 2024, rising over 130% year-to-date and significantly outperforming the Nasdaq’s 17% increase. The company is scheduled to release its next quarterly earnings report on August 28, 2024
*Stock data, cryptocurrency, and commodity prices at the market closing.
Pending home sales in June 2024 declined 2.6% from the previous year in June of 2024 but better than the 6.6% drop in May. Overall, home sales are down over 25% from 2001 levels. The household growth rate is slightly less than 1% per year since 2001 which means the need for housing should be up 25% from 2001 (not down 25%). NAR Chief Economist Lawrence Yun added:
The rise in housing inventory is beginning to lead to more contract signings. Multiple offers are less intense, and buyers are in a more favorable position.
The Chicago Business Barometer, also known as the Chicago PMI, fell to 45.3 in July 2024 from a seven-month high of 47.4 in June. Readings below 50 indicate contraction. This index is viewed as an early indicator the the national ISM manufacturing index which will be released tomorrow. The bottom line is that data continues to indicate that July manufacturing is in a recession.
The Federal Reserve released their FOMC meeting statement for 31 July 2025. The meeting statement seems to suggest that the FOMC is closer to starting a reduction in the federal funds rate. Here is a portion of the statement and you can draw your own conclusion.
Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.