G2 Weather Intelligence

Counting Carbons

Carbon Counter L3 from Climate Central on Vimeo.

I saw this display yesterday while in Manhattan and wondered who was funding it.  Turns out its Deutsche Bank. 

Interesting ...

Drinking From the Toilet

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Robert Glennon
www.thedailyshow.com
Daily Show Full Episodes Political Humor Joke of the Day

Celebrity Weather: "Yo Soy El Nino"

Senate Climate Debate Gets Testy

From the July 17th edition of the NY Times.

Does Hot Weather Hurt the Economy?

Fascinating NPR story on an MIT study of the impact of climate on the economic output of poor countries.

Listen here or read the transcript below:

Hot Climates May Create Sluggish Economies

by David Kestenbaum

Morning Edition, July 17, 2009 · New research suggests that higher temperatures can have a damaging effect on the economies of poor countries. The study, by economists at the Massachusetts Institute of Technology, found that in years with higher temperatures, poor countries experienced significantly slower economic growth.

The research adds to an economic puzzle that dates back hundreds of years: Why do the poorer economies of the world tend to be in hot places, while the more successful economies are found in cooler climates?

The French writer Montesquieu wondered about it in the 1700s. Now there is significantly more data to work with. A graph of per-capita GDP and average temperature shows rich countries at one end — Norway, Germany, France and the U.S. — and poverty at the other end in Cambodia, Liberia and Congo.

Many researchers have written this off as a historical accident, perhaps a legacy of colonialism.

Ben Olken, an associate professor of economics at MIT, and his colleagues wanted to examine the temperature connection more closely. They decided that instead of comparing one country to another, they would look within countries. Did a hot year mean slower economic growth?

The answer appears to be yes. They found that for poor countries, an increase in annual average temperature by 1 degree centigrade corresponded to a 1.1 percent drop in per-capita gross domestic product.

It's "a huge effect," Olken says. The difference between a country that's in recession and one that is buzzing along amounts to a 3 percent shift in GDP. "So, 1 degree explaining a 1.1 percent shift is a huge effect of temperature."

It's unclear exactly why temperature would have this effect. It might be that crop yields go down, or that disease is more of a problem. Or it might just be what you could call the "sloth" theory — it's hard to work when it's hot out. Who wants to mow the lawn in August?

"This stuff is not implausible," Olken says, "If you look back at the U.S. before the advent of air conditioning, there were times when the federal government would shut down. It was too hot out."

The researchers found that temperature shifts did not appear to affect the wealthier countries, perhaps because of air conditioning, or because they already are situated in cooler climates.

The results suggest that global warming could increase the gap between rich and poor.

"One of the takeaways I have from this paper is it seems like the economic impacts of increased temperature in poor countries are going to be very severe," Olken says.

William Easterly, an economist at New York University, says the new study is fascinating, but he's not convinced.

"It's way too soon to take one statistical finding and say we have solved a 500-year-old problem of why temperature and per-capita income are associated with each other," Easterly says.

Easterly says he thinks cooler countries have stronger economies because of a historical accident. "It was Europeans who discovered first how to set up a prosperous market economy," he says. Europeans spread to other temperate parts of the world. That explains why the rich economies are there today.

Why didn't the hotter parts of the world catch up? "When you're ahead, you tend to stay ahead," Easterly says. The slave trade was one example of how that played out. "Europe and America benefited from the profits of the slave trade. And Africa was permanently harmed by the slave trade."

Olken says his team has checked and rechecked its results with a number of data sets. He says the temperature and GDP correlations keep showing up.

Whatever the cause, there are some countries that buck the trend. Singapore is just about on the equator and has a strong economy. Indonesia is growing fast.

Easterly says the great hope of global trade is that countries can adapt to do whatever makes sense in their part of the world. With time, they can overcome climate, even history.

Photo courtesy of NPR.org.

El Nino Mucho

Mike Halpert, deputy director of the Climate Prediction Center.  Hosted by Dave Iverson.

A thoughtful and balanced discussion on El Nino.  Listen in if you've a got a few minutes to spare.

Thanks to Angelo Quagliata for forwarding this to me.

- Paul

Train Versus Tornado

June 2009 Comparable Store Sales - Now To Find Quality of Earnings

Following is Richard Hasting's (Consumer Strategist for Global Hunter Securities) take on June retail sales in the US.

Click here for a copy of the full report which includes detailed company-level statistics as well as input from G2 Weather.

 
June 2009 Comparable Store Sales: 
Estimates Getting Easier – Now To Find Quality of Earnings

Summary:

June 2009 retailer comparable store sales reflected a variety of influences, with some retailers surprising with strong sales such as TJX, while others especially teen-oriented specialty apparel retailers struggling. We cover the day’s data in detail in the PDF available online here.

Highlights:

Department stores and off-price results slightly better than expected. We like to bundle department stores and off-price retailers into the same data pool due to similar merchandising and brands. Results in June 2009 indicated slightly better than expected results at certain department stores and better-than-consensus results at TJX Companies (TJX) (led by the MarMaxx division) and Ross Stores (ROST). Earnings quality in off-price retailing is much more transparent than department stores, thus we like the off-price retailing actual results today for earnings quality through at least Q2.  

Teen unemployment an issue. We cited teen unemployment in our June 2009 Comp Store Sales Preview (released earlier this week). Since we have every reason to believe it is likely to worsen, then we would be cautious on this subgroup going into the critical Back-to-School buildup. We make reference especially to the developing trend in the difference between the current month’s comp % and the fiscal year-to-date comp %. These widened sharply at Hot Topic (HOTT) by 10.2 percentage points, and at covered company, Buckle (BKE, a GHS Research covered name) where the spread widened by 5.6 points. We would be monitoring Aeropostale (ARO) carefully in the next two months to see if this spills over to ARO. 

Target (TGT) raising Q2 guidance but quality of earnings is an issue. Target missed comps estimates of -5.8% with a -6.2% actual comp and then raised Q2 guidance “through better than expected gross margin rate and continued expense discipline in our retail segment.” Our understanding of “gross margin” includes our understanding of supply chain; that suppliers are a major opportunity to reduce cost of goods sold. We therefore are inclined to interpret this as something other than product-specific margin growth – especially since TGT did not mention specific product lines as a source of margin expansion, and concurrently cited “expense discipline” thus reinforcing our concerns about quality of earnings.

Weather’s impact to remain an issue perhaps through September. Conversations this week with Business Weather Consultant, Paul Walsh of G2 Weather Consulting, suggests that the unfavorable weather that hit the Northeast the hardest during May and June could persist through September 2009. Please refer to his additional remarks on Page 13.

Consumer weakness hitting the entire intermarket system. We would not stop at comparable store sales as an end in itself: the consumer’s overall weakness restrains energy prices, thus hitting other markets and other stocks in other sectors. Sector rotation strategies remain problematic for as long as this effect remains. Refer to our look at the XLY/XLP ratio and gas prices on Pages 17-18 of this report

 

June 2009 Retail Sales Swamped by the Weather; July Outlook Similar

 
Demand for summer seasonal merchandise was down significantly in June 2009 across the three largest population centers in the US — the northeast, midwest and west coast markets.

Hardest hit was the northeast where persistent rain (>20 days during the month) and abnormally cold temperatures (coldest in 10 years) led to a dramatic year-over-year decrease in demand for summer seasonal items.  For perspective as to how dramatic the impact was on summer-time businesses, the Long Island Press described the sales environment this way: 

“For seasonal business owners on Long Island, it is the weather that affects the balance sheet, and June 2009 was the collapse of Enron, the housing market and Bernie Madoff all rolled into one.”
 
The Bottom Line: Long Island’s Economy Needs Sunny Skies, June 25, 2009

From a sector perspective, the biggest negative impact will be on specialty apparel, department stores and, to a lesser extent Mass merchants.  The big box home center retailers (HD and LOW) will benefit from the generally great growing conditions in the northeast which are compelling purchases of relatively inelastic lawn and garden care merchandise.

The extreme heat in the southeast was, on a macro scale, a neutral to slightly negative impact on the month as the correlations to heat and sales in June in those areas are negligible and there may some negative traffic impacts.  

For July, the persistent pattern of seasonally cool and wet conditions will continue in the northeast and Midwest and abnormal heat will continue in the south and southwest.  These conditions will continue to put price and margin pressure on apparel retailers -- as they struggle to overcome the weak demand environment with price incentives -- and will continue to fuel demand for home center/lawn and garden retailers.

Communicating Climate Change Part 3: Can Democracy Survive Complexity?