S&P Global — 25 September 2024
Daily Update: September 25, 2024
The Impact of Increasing Drought on GDP
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
In recognition of New York Climate Week, S&P Global Sustainable1 published a special edition of the S&P Global Sustainability Quarterly. This week, the Daily Update will review issues raised in the publication.
The problem with being pragmatic about energy transition is that evaluating the energy industry in a vacuum may overlook a broader economic reality. While building a green energy grid significantly impacts GDP, droughts caused by climate change could be much more devastating economically. Change may be costly, but inaction is much more expensive, leaving aside the human impacts of chronic water shortages. S&P Global Sustainable1 recently published an article examining water problems resulting from climate change: “How climate change is exacerbating drought risks.”
Climate change will affect precipitation patterns differently depending on location. For some areas, rain will become more frequent. But in many areas, droughts will become more frequent and severe. Without serious emissions reductions, some large economies will experience increasingly frequent and severe droughts by the 2050s, notably Saudi Arabia, Spain and Turkey. Under a medium-high climate change scenario, those countries could experience droughts 45% of the time by that decade. The frequency and severity of droughts in Mexico, Australia and Italy will also double compared to current conditions. Across the top 20 economies ranked by GDP, all will see more frequent drought conditions.
Many of the world’s largest cities, which serve as engines of economic growth, will also be affected by increasing drought. Cairo and Mexico City will be particularly affected under a medium-high scenario with limited mitigation. Mexico City has a current population of 23 million people. By the 2050s, residents of that city will face severe or extreme drought conditions nearly one-third of the time.
Limited mitigation will lead to significant economic impacts from droughts. While droughts will clearly impact agriculture, most economic sectors depend on fresh, clean water to function. In 2022, the economic losses from drought totaled $26.6 billion globally, according to insurance company Swiss Re. In the US, nearly 30% of GDP could be exposed to severe or extreme drought conditions by the 2050s. Among large Western economies, that exposure is on the low end of the scale. For Italy, France and Germany, GDP exposure from drought under lower mitigation scenarios ranges from 70% to 97%.
Today is Wednesday, September 25, 2024, and here is today’s essential intelligence.
Crossing Multidisciplinary Frontiers To Address Climate Change Impacts On Economics And Nature
To better estimate the financial impact of climate change, the physical science, economics and ecological disciplines must collaborate and address complex problems on the frontiers of their respective fields. The cross-disciplinary challenge is to forge a common understanding of how diverse and complex models and data can be linked in a consistent way.
—Read the article from S&P Global Sustainable1
Flash Eurozone PMI Top Five Takeaways: Heightened Risk Of Economy Facing Hard Landing
The PMI® survey data for September showed average prices charged for goods and services rising at the slowest rate since February 2021. The survey PMI's selling price index has in fact now fallen to a level below that consistent with the ECB's 2% target. Importantly, services inflation has cooled further, down to its lowest since March 2021. Goods prices are falling. However, any success in driving down inflation appears to be coming at an increased cost in terms of economic growth. Output across manufacturing and services fell in September as a deepening manufacturing downturn was accompanied by a near-stalling of output in the services economy. Both sectors are reporting weakening demand conditions and sentiment about business prospects has further soured.
—Read the article from S&P Global Market Intelligence
S&P 500 Earnings Rise 12.9% In Q2 2024
Combined second-quarter normalized earnings per share for the S&P 500 rose nearly 13% year over year as most of the large-cap index's constituent sectors also reported earnings growth, according to the latest S&P Global Market Intelligence data. As of Sept. 10, all S&P 500 sectors except industrials, materials and real estate reported earnings growth. The communication services sector reported the largest EPS growth among sectors.
—Read the article from S&P Global Market Intelligence
Algeria Offers Waterborne LNG Cargoes As Pipeline Maintenance Picks Up
Algeria's LNG exports have seen a sudden increase, as pipeline maintenance from the country saw the supply hub begin to offer Free-On-Board LNG cargoes to make up for reduced gas flows, according to traders and data from S&P Global Commodity Insights. As of Sept. 20, Algeria has exported 700,000 metric tons, or 13 cargoes, of LNG this month, according to Commodity Insights data.
—Read the article from S&P Global Commodity Insights
Southwest Gas Files Multiyear Rate Case With Calif. Utilities Commission
Southwest Gas Corp. filed an application with the California Public Utilities Commission to increase gas base rates across its Southern California, Northern California and South Lake Tahoe territories to recover costs it has incurred and will incur to own and operate the facilities used to maintain and provide safe and reliable natural gas service to customers. The company requested increases in the 2026 test year and post-test year increases in 2027–2030.
—Read the article from S&P Global Market Intelligence
Listen: MediaTalk | Season 2 | Ep. 31 — What A Summer Of Sequels Says About 2024's Box Office Outlook
In this episode, MediaTalk Host Mike Reynolds speaks to S&P Global Market Intelligence Kagan Senior Research Analyst Wade Holden, who specializes in the movie business, and Mac Mathews, associate director of editorial, design and publishing at S&P Global and film aficionado. Wade and Mac discuss the performance of the summer box office, touching on the films that most resonated with moviegoers and films where viewers opted to wait until the streaming release. Spoiler alert: while franchise films and long-awaited sequels did well, a number of originals failed to find their audiences — at least in theaters.
—Listen and subscribe to the podcast from S&P Global Market Intelligence
London: 4th Annual Global Emerging Markets Conference (Oct. 3, 2024)
This in-person event will feature critical discussions on credit and market trends, with thematic panels that bring together senior analysts and external market participants.
—Register for the in-person event from S&P Global Ratings