Confounding can be an issue when analyzing the association between quantities of money and inflation. Last week, we looked closely at a possible example of confounding. This week, we consider that example further.
Image by Richard Reid from Pixabay.
The Japan Agency for Marine-Earth Science and Technology, or JAMSTEC, is a Japanese national research institute for marine-earth science and technology
From the JAMSTEC Discussion:
“The latest observations indicate that there are weak signs of a La Niña. The SINTEX-F ensemble mean predicts that a La Niña Modoki will develop in the boreal autumn and persist into the boreal winter. However, there is a large uncertainty in the timing and amplitude of the event.”
Although it is a World forecast, it includes a forecast for North America since North America is part of the World. One might try to compare it to the NOAA Outlook we published yesterday which can be accessed HERE.
First, we take a look at the forecasted sea surface temperature anomalies (SSTA). JAMSTEC starts by forecasting the SSTA and Nino 3.4 Index on the first day of the month and from there it usually takes their models about two weeks to produce their seasonal forecast. I received it from JAMSTEC on May 14 close to when NOAA issued their Seasonal Update this month. The JAMSTEC model runs are based on conditions as of July 1, 2024. The NOAA Seasonal Outlook is based on conditions closer to the time when it was issued.
We do not have a full three-season forecast from JAMSTEC this month. We have forecast maps for ASO, SON and DJF so it is really a seven-month forecast as ASO and SON overlap a lot. For each of these three-month Outlooks, I also show the corresponding NOAA Outlook. The two are remarkably similar which is very unusual.
We also have single-month forecasts for August, September, and October 2024. I have a single-month outlook for August from NOAA but not single-month outlooks for September and October I did not show those comparisons.
Let’s take a look.
| This shows their forecast of sea surface temperature anomalies at three points in time. Blue is cold and is associated with La Nina if it occurs in the Nino 3.4 measurement areas. You no longer can see the El Nino tongue of warm water extending from Peru to the west in the ASO image but look at that blob of cool (anomaly) water to the west i.e. by this point in time this has Modoki characteristics that impact the Walker circulation. SON and DJF also show La Nina but are increasingly to the west and may not be in the Nino 3.4 measurement area. I have written about that before. It raises questions about the reliability of our current approach to thinking about the ENSO Cycle. This is covered in another article that can be accessed HERE. But JAMSTEC is showing a relatively normal ocean off the coast of much of the U.S. coasts which probably explains their forecast.
Of interest also is the cold water of the West Coast of the U.S. and the warm water between Africa and the north coast of South America which can support tropical storms and hurricanes. JAMSTEC uses the same definition of Normal (climatology) as NOAA. JAMSTEC does a better job at characterizing La Ninas and El Ninos than NOAA. JAMSTEC provides me with a lot of other information that I do not include in my articles to keep them to a manageable size for readers. That material is the atmospheric pressure patterns. |
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
Sat Jul 20 2024
Valid 12Z Sat Jul 20 2024 – 12Z Mon Jul 22 2024…A break in the heat continues for much of the eastern two-thirds of the
country but heat will intensify in the interior Pacific Northwest through
this weekend……Scattered thunderstorms continue across the South and Southeast as
monsoonal thunderstorms linger across the Four Corners region……Scattered thunderstorms over the central Plains today will gradually
shift in the southern Plains by Monday while a cold front will bring new
rounds of thunderstorms across the northern tier states…A cool air mass settling in across the eastern two-thirds of the country
will offer an extended reprieve from the heat through the next few days.
Afternoon high temperatures will only reach into the 70s and 80s today
from the northern and central Plains eastward through the Atlantic coast
with the exception of the Sunshine State and the coastal plain of Georgia
and South Carolina where highs will remain in the 90s. Texas will have
highs into the 90s to near 100 this afternoon but will cool down into the
70s and 80s by Monday. In contrast, the heat across the western U.S. is
expected to persist, with high temperatures once again exceeding 100
degrees across much of the region. The interior Pacific Northwest will
feel the heat intensify, with afternoon readings possibly reaching 110
degrees at the hottest locations by Sunday afternoon along with little
overnight relief. Daily highs across the Southwest will generally hover
in the 110s. Please continue to practice heat safety in this persistent
and prolonged heat wave in the western U.S. through the next couple of
days. A Pacific cold front will approach the West Coast on Monday,
lowering the heat only slightly for inland sections.The upper level pattern will be slow to change across the lower 48 through
the next few days. A nearly stationary front will remain draped across the
South and into the Mid-Atlantic region, keeping the cooler air north of
the boundary and the warm, moist air to the south. The front will also
help focusing and triggering scattered thunderstorms from the Gulf Coast
to the Southeast through the next few days. For the Southwest/Four
Corners region, monsoonal moisture will continue to support on-and-off
thunderstorms through the weekend. These storms will keep an elevated
threat for isolated to scattered flash flooding and severe weather, which
may result from the strongest of the storms. Meanwhile, scattered
thunderstorms over the central Plains today will gradually shift into the
southern Plains by Monday as a weak low pressure wave slowly digs
southward. Across the northern tier states, a cold front arriving from
central Canada will bring new rounds of thunderstorms from the northern
Plains through northern New England during the next couple of days.
*Stock data, cryptocurrency, and commodity prices at the market closing.
Today’s Economic Releases Compiled by Steven Hansen, Publisher:
The Ports of Los Angeles and Long Beach handle about 29% of all containerized international waterborne trade in the U.S., and over 40% of the nation’s imports and exports. These ports provide a timely view of import and export volumes. In July 2024, import volumes are up 20% year-over-year whilst export volumes are up 9% year-over-year. Import volumes are now at their pre-COVID levels which suggests a growing appetite for imported goods – all while exports are languishing well below the pre-COVID levels. Further, this month’s data suggests a negative headwind to GDP as imports are subtracted from GDP.
Here is a summary of headlines we are reading today:
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
On the third Thursday of the month right on schedule NOAA issued their updated Seasonal Outlook which I describe as their Four-Season Outlook because it extends a bit more than one year into the future. The information released also included the Mid-Month Outlook for the following month plus the weather and drought outlook for the next three months. I present the information issued by NOAA and try to add context to it. It is quite a challenge for NOAA to address the subsequent month, the subsequent three-month period as well as the twelve successive three-month periods for a year or a bit more.
With respect to the long-term part of the Outlook which I call the Four-Season Outlook, the timing of the transition from Neutral to LaNina is challenging to predict. We are now in ENSO Neutral. La Nina is the likely scenario for this summer almost to the end of the forecast period.
It will be updated on the last day of July.
| Notice that the Outlook for next month and the three-month Outlook are fairly similar. This tells us that September and October will be fairly similar to August. |
| The expansion of the area impacted by drought development is extensive but different than what was predicted last month. There is also a large area of drought improvement. |
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
Fri Jul 19 2024
Valid 12Z Fri Jul 19 2024 – 12Z Sun Jul 21 2024…A break in the heat is expected for much of the eastern two-thirds of
the country but triple-digit heat will continue in the West through this
weekend……Scattered thunderstorms will be confined across the South and Southeast
as monsoonal thunderstorms linger across the Four Corners region……Strong to severe thunderstorms possible today over the north-central
Plains…A cool air mass arriving from central Canada is bringing a welcome relief
to the heat and humidity into the northeastern quadrant of the country
today. Temperatures as high as the 100s a couple of days ago in the
Mid-Atlantic will only recover to around 90 degrees this afternoon with
lower humidity. On the other hand, the heat across the western U.S. is
expected to persist through this weekend, with high temperatures once
again exceeding 100 degrees across much of the region. In fact, the heat
is forecast to intensify over the interior Pacific Northwest, with
readings possibly reaching 110 degrees at the hottest locations by Sunday
afternoon along with little overnight relief. Meanwhile, high
temperatures well into the 110s will be common across the Desert
Southwest. Please continue to practice heat safety in this persistent and
prolonged heat wave in the western U.S. throughout this coming weekend.The upper-level pattern that supports the heat the West and the cooler
weather across the central to eastern U.S. will be slow to evolve through
the next few days. A front that separates the cool air from the warm and
moist air along the Gulf Coast will remain stationary across the South.
Scattered thunderstorms will be confined in the warm sector across the
South and Southeast where they will linger through the weekend.
Meanwhile, monsoonal moisture will support thunderstorms across the Four
Corners region, lingering on-and-off through the weekend. Isolated to
scattered flash flooding and severe weather may result from the strongest
storms. Farther north, a weak low pressure wave will likely trigger
thunderstorms which could become strong to severe over the north-central
Plains today into tonight. Additional thunderstorms are expected to track
farther east toward Iowa and Missouri during the weekend.
*Stock data, cryptocurrency, and commodity prices at the market closing.
Today’s Economic Releases Compiled by Steven Hansen, Publisher:
The July 2024 Philly Fed Manufacturing Business Outlook Survey‘s indicator for general activity rose 13 points to 13.9, and the indexes for shipments and new orders turned positive. The employment index also turned positive, suggesting an overall increase in employment levels. Both price indexes continued to indicate overall price increases. Most future activity indicators rose, suggesting more widespread expectations for overall growth over the next six months. If you are a fan of surveys, then you gotta believe manufacturing activity is growing. I am a skeptic as I see retail sales flat and imports rising – these as significant headwinds to manufacturing.
The Conference Board Leading Economic Index® (LEI) for the U.S. declined by 0.2 percent in June 2024 to 101.1 (2016=100), following a decline of 0.4 percent (upwardly revised) in May. Over the first half of 2024, the LEI fell by 1.9 percent, a smaller decrease than its 2.9 percent contraction over the second half of last year. Note that The Conference Board lately has been providing the doomiest view of the economy. An explanation by Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board:
The US LEI continued to trend down in June, but the contraction was smaller than in the past three months. The decline continued to be fueled by gloomy consumer expectations, weak new orders, negative interest rate spread, and an increased number of initial claims for unemployment. However, due to the smaller month-on-month rate of decline, the LEI’s long-term growth has become less negative, pointing to a slow recovery. Taken together, June’s data suggest that economic activity is likely to continue to lose momentum in the months ahead. We currently forecast that cooling consumer spending will push US GDP growth down to around 1 percent (annualized) in Q3 of this year.
In the week ending July 13, the advance figure for seasonally adjusted initial unemployment claims 4-week moving average was 234,750, an increase of 1,000 from the previous week’s revised average. The previous week’s average was revised up by 250 from 233,500 to 233,750. Although initial claims are modestly trending up, it is well within the values expected in a growing economy.
CoreLogic’s US Annual Rental Price Growth Rate for single-family rents rose by 3.2% year over year in May 2024, the highest rate of growth since April 2023. May’s annual rent growth was generally in line with numbers recorded over the decade before the pandemic.
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
Much of the information in this report comes from the monthly emails I receive from John Bateman. He does public outreach for NOAA and in particular NCEI. I could find the same information and more on the NCEI website but John Bateman produces a good summary so I use it or most of it. I also add additional information from NCEI or other NOAA websites. At the end of the article, I provide links that will get you to the full reports and much additional information.
| My comments if any are in boxes like this one. |
| This is the temperature trend for North America. It covers a larger geographical area than just CONUS but I find it easier to read. It almost looks like the temperature has plateaued. |
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| The temperature for the world, land and ocean hit a new record. |
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| The temperature for the world, land only hit a new record. Notice that land temperatures increase faster than land and ocean as water takes more energy |
Short Range Forecast Discussion
NWS Weather Prediction Center College Park MD
Thu Jul 18 2024
Valid 12Z Thu Jul 18 2024 – 12Z Sat Jul 20 2024…There is a Slight Risk of severe thunderstorms over parts of the
southern Mid-Atlantic on Thursday……There is a Slight Risk of excessive rainfall over parts of the southern
Mid-Atlantic, Southern Plains/Lower Mississippi Valley, and Southern High
Plains/Southern Rockies on Thursday and over the southern Mid-Atlantic and
Southern Rockies on Friday……There are Excessive Heat Warnings/Watches and Heat Advisories over
parts of the Pacific Northwest into parts of California/Southwest…A front extending from Northern New England to the Mid-Atlantic and then
southwestward to the Central Gulf Coast and western Texas will move off
the Northeast and Mid-Atlantic Coast by Friday. Also, the southern half of
the boundary will linger near the Southeast and across the Gulf Coast
States through Friday evening. The lingering boundary will produce
showers and severe thunderstorms over parts of the southern Mid-Atlantic.
Therefore, the SPC has issued a Slight Risk (level 2/5) of severe
thunderstorms over parts of the southern Mid-Atlantic through Friday
morning. The hazards associated with these thunderstorms are frequent
lightning, severe thunderstorm wind gusts, hail, and a minimal threat of
tornadoes.In addition, the showers and thunderstorms will create heavy rain over
parts of the southern Mid-Atlantic. Therefore, the WPC has issued a Slight
Risk (level 2/4) of excessive rainfall over parts of the southern
Mid-Atlantic through Friday morning. The associated heavy rain will
create mainly localized areas of flash flooding, with urban areas, roads,
small streams, and low-lying areas the most vulnerable.A Second area of heavy rain will develop along the front over parts of the
Southern Plains/Lower Mississippi Valley. Therefore, the WPC has issued a
Slight Risk (level 2/4) of excessive rainfall over parts of the Southern
Plains/Lower Mississippi Valley through Friday morning. The associated
heavy rain will create mainly localized areas of flash flooding, with
urban areas, roads, small streams, and low-lying areas the most
vulnerable. Moreover, tropical moisture and upper-level impulses will
produce showers and thunderstorms over parts of the Gulf Coast to the
Southeast.Further, a third area of heavy rain will develop over parts of the
Southern High Plains/Southern Rockies. Therefore, the WPC has issued a
Slight Risk (level 2/4) of excessive rainfall over parts of the Southern
High Plains/Southern Rockies through Friday morning. The associated heavy
rain will create mainly localized areas of flash flooding, with urban
areas, roads, small streams, low-lying areas, and burn scars the most
vulnerable.In addition, moisture over the Southwest and daytime heating will produce
showers and thunderstorms over parts of the Great Basin and Southwest from
the late afternoon into late evening. Additionally, on Thursday,
upper-level impulses going over an upper-level ridge over the Northern
Rockies/Northern High Plains and moisture will produce scattered showers
and thunderstorms over parts of the Northern/Central Rockies.On Friday, the tropical moisture and nearby boundary will produce showers
and thunderstorms over the Central Gulf Coast to the Southeast and
southern Mid-Atlantic. Some showers and thunderstorms will create heavy
rain over parts of the southern Mid-Atlantic. Therefore, the WPC has
issued a Slight Risk (level 2/4) of excessive rainfall over parts of the
southern Mid-Atlantic from Friday through Saturday morning. The
associated heavy rain will create mainly localized areas of flash
flooding, with urban areas, roads, small streams, and low-lying areas the
most vulnerable.Furthermore, monsoonal moisture and daytime heating will aid in producing
showers and thunderstorms over parts of the Southwest, Great Basin, and
Central/Southern Rockies from the late afternoon into late evening. An
area of showers and thunderstorms will create heavy rain over parts of the
Southern Rockies/High Plains. Therefore, the WPC has issued a Slight Risk
(level 2/4) of excessive rainfall over parts of the Southern
Rockies/Southern High Plains from Friday through Saturday morning. The
associated heavy rain will create mainly localized areas of flash
flooding, with urban areas, roads, small streams, low-lying areas, and
burn scars the most vulnerable.Moreover, the upper-level energy moving out of the Northern Rockies into
the Northern/Central Plains will produce showers and strong to severe
thunderstorms with areas of heavy rain. Therefore, the SPC has issued a
Marginal Risk (level 1/5) of severe thunderstorms over parts of the
Northern/Central High Plains from Friday through Saturday morning. The
hazards associated with these thunderstorms are frequent lightning, severe
thunderstorm wind gusts, hail, and a minimal threat of tornadoes.
Additionally, the WPC has issued a Marginal Risk (level 1/4) of excessive
rainfall over parts of the Northern/Central Plains from Friday through
Saturday morning. The associated heavy rain will create localized areas
of flash flooding, affecting areas that experience rapid runoff with heavy
rain.Meanwhile, upper-level ridging will build over the Northern Rockies to the
Southwest, spawning Excessive Heat Warnings/Watches and Heat Advisories
over parts of the Pacific Northwest from Thursday into Saturday. Moreover,
the upper-level ridge has prompted Excessive Heat Watches and Heat
Advisories over parts of California and the Southwest. The ridging will
create widespread high temperatures in the 90s to 100s followed by little
overnight relief, with lows in the upper 60s to 70s representing a 20-35
degree departure from average for many areas. The multi-day nature of this
event will create dangerous conditions, particularly for people who are
especially vulnerable to the effects of heat, such as young children,
older adults, people with chronic medical conditions, and pregnant women.
*Stock data, cryptocurrency, and commodity prices at the market closing.
Today’s Economic Releases Compiled by Steven Hansen, Publisher:
Privately-owned housing units authorized by building permits in June 2024 were 3.1% below June 2023. Privately-owned housing starts in June were 4.4% below June 2023. Privately-owned housing completions in June were 15.5% above June 2023. At first glance you would think there is something wrong with building permits and starts. However, there is a massive quantity of homes under construction – and the industry does not need to put more homes into the pipeline. The bottom line – new homes completed are growing at a good rate.
Industrial production for June 2024 rose 1.6% year-over-year with components manufacturing up 1.1% year-over-year, mining down 0.6% year-over-year, and utilities up 7.9% year-over-year. Capacity utilization moved up to 78.8 percent in June, a rate that is 0.9 percentage point below its long-run (1972–2023) average. This month’s manufacturing significant growth clearly moves manufacturing out of a recession – but I am not too optimistic that manufacturing growth spurt will continue long term.
The Beige Book for July 2024 states:
Economic activity maintained a slight to modest pace of growth in a majority of Districts this reporting cycle. However, while seven Districts reported some level of increase in activity, five noted flat or declining activity—three more than in the prior reporting period. Wages continued to grow at a modest to moderate pace in most Districts, while prices were generally reported to have risen modestly. Household spending was little changed this period according to most District banks. Auto sales varied across Districts this cycle, but some Districts noted that sales were lower due in part to a cyberattack on dealerships and high interest rates. Most Districts saw soft demand for consumer and business loans. Reports on residential and commercial real estate markets varied, but most banks reported only slight changes, if any, in recent weeks. Travel and tourism grew steadily and was on par with seasonal expectations. Agricultural conditions varied in tandem with sporadic droughts across the nation. Districts also reported widely disparate trends in manufacturing activity ranging from brisk downturn to moderate growth. Retail restocking spurred slight growth in transportation activity. Meanwhile, tight capacity in ocean shipping led to a surge in spot rates. Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation.
On balance, employment rose at a slight pace in the most recent reporting period. Most Districts reported employment was flat or up slightly, while a few Districts reported modest employment growth. Several Districts reported declines in employment in the manufacturing sector due to slowdowns in new orders. Skilled-worker availability remained a challenge across all Districts; however, several Districts reported some improvement in labor supply conditions. Additionally, labor turnover was lower, which reduced demand to find new workers. Looking ahead, contacts in several Districts expect to be more selective on who they hire and not backfill all open positions. Wages grew at a modest to moderate pace in most Districts. However, several Districts reported some slowing of wage growth due to increased worker availability and less competition for workers.
Prices increased at a modest pace overall, with a couple Districts noting only slight increases. While consumer spending was generally reported as showing little to no change almost every District mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items, or shopping around for the best deals. Most Districts noted that input costs were beginning to stabilize; however, Atlanta specifically noted products like copper and electrical supplies have seen a notable increase over this period.
The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety of mostly qualitative information, gathered directly from each District’s sources. This months release shows a very modest deterioration from the previous report which agrees with our economic forecast which shows little change in economic conditions.
Click on the “Read More” below to access these, other headlines, and the associated news summaries moving the markets today.
